In its recently launched white paper, leading blockchain company, Ripple announced that its native cryptocurrency XRP could bridge the existing gap between various central bank digital currencies (CBDCs). Moreover, Ripple pitches XRP to move value for different CBDCS in a cost-effective manner.
To this, the US Securities and Exchange Commission filed a lawsuit against Ripple alleging that the digital payments firm has been selling unauthorized securities illegally in the form of XRP. Legal counsel Jorge Tenreiro also argued that XRP is different from the two large-cap crypto assets, Bitcoin and Ethereum, that have already been cleared by the US regulatory agency SEC. He also argued that even if Ripple had found a use case for its XRP token, it could not prove XRP as a utility token (like Bitcoin or Ethereum), and this went against the company’s self-claim of calling XRP as a Bridge Currency. XRP is one of the fastest and scalable digital assets that enable real-time global payments anywhere across the world. By using XRP, banks can source real-time liquidity on demand without having to pre-fund any Nostro account. It also helps payment providers expand their reach into new markets by lowering foreign exchange costs and providing faster payment settlement.
After the SEC filed a lawsuit against Ripple and XRP in December, its price fell by more than 60%, i.e., from US$0.60 in November to US$0.25 post-December. Also, and many exchanges delisted XRP. According to Ripple’s report of Q4 of 2020, the total XRP sales by Ripple was US$76.27 million, which fell from US$35.84 million in the Q3. The drastic price fall of XRP and its delisting was again accompanied by the liquidation of XRP holdings by the top two US-based investment firms, Grayscale and Bitwise Asset Management.
While promoting XRP as the future of CBDC, Ripple lists the various benefits of CBDCs. According to Ripple, central banks have the power to control the countries’ monetary policies, and when it comes to the challenges faced by CBDCs, the most important part to ensure the token’s interoperability, and this is what Ripple’s XRP is aimed at to do. Each CBDC has the power to create its own rules and policies tailored to suit its individual domestic market. But at the same time, it is also important for the CBDCs to be guided by collective protocols that will allow them to cooperate with other CBDCs and digital currencies seamlessly. Ripple also proposes that central banks use a private version of the existing XRP ledger designed specifically for central banks. This will allow central banks to enjoy decentralized ledgers’ flexibility and functionality while retaining centralized control over the existing economic management and monetary policies.