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09/12/2024 5:55 pm
Why Banks Don’t Need XRP
Banks have little incentive to adopt XRP, as existing and emerging technologies already meet their needs more effectively, without the risks tied to a public cryptocurrency like XRP. Here’s why:
1. Robust Alternatives Already Exist
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SWIFT’s Evolution: The SWIFT network, long the backbone of global payments, has upgraded with its Global Payments Innovation (GPI) initiative. GPI slashes settlement times to minutes—sometimes seconds—while enhancing transparency with end-to-end tracking. Over 4,000 banks use SWIFT GPI, processing $300 billion daily as of 2023. This dwarfs Ripple’s claimed transaction volume and proves banks don’t need XRP for speed or efficiency.
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Central Bank Digital Currencies (CBDCs): Over 100 countries are exploring CBDCs, with projects like China’s e-CNY and the EU’s digital euro in advanced stages. CBDCs offer instant, cost-free transactions within a controlled ecosystem, eliminating the need for a bridge asset like XRP. The Federal Reserve’s FedNow, launched in 2023, further demonstrates how central banks are modernizing payments without Ripple.
2. Banks Favor Control Over Public Blockchains
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Permissioned Blockchains: Banks prefer proprietary or consortium-based blockchains like JPMorgan’s JPM Coin, R3’s Corda, or Hyperledger Fabric. These systems allow banks to dictate governance, ensure compliance, and avoid the unpredictability of public networks like XRP Ledger. For example, JPM Coin processes billions monthly for institutional clients, all within a permissioned environment.
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Interoperability Without XRP: Ripple touts XRP as a universal bridge, but banks achieve interoperability through APIs and consortia like the Interledger Protocol (ironically co-developed by Ripple but not reliant on XRP). This flexibility renders XRP redundant.
3. XRP’s Adoption Is a Mirage
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Ripple boasts partnerships with over 300 financial institutions, yet actual XRP usage remains negligible. Most partners use RippleNet—a messaging and settlement system—without touching XRP. A 2022 Ripple report admitted that only a “small fraction” of its clients use XRP for on-demand liquidity (ODL). Major banks like Santander and Standard Chartered have publicly distanced themselves from XRP, favoring fiat-based solutions or their own blockchain experiments. After 12 years, XRP’s failure to gain traction signals banks’ indifference.
4. Volatility and Regulatory Headaches
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XRP’s price swings—dropping 70% in 2018 and surging 300% in 2021—make it a liability for banks needing stability. Even brief holding periods during transactions introduce risk. Worse, XRP’s legal status is murky. The SEC’s ongoing lawsuit against Ripple (filed in 2020) questions whether XRP is an unregistered security, a cloud that repels risk-averse banks. In contrast, CBDCs and permissioned blockchains offer stability and compliance out of the box.
5. Better Digital Assets Are Available
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Stablecoins like USDC and USDT, backed by audited reserves, provide predictable value and massive liquidity—$50 billion and $110 billion in circulation, respectively, as of 2024. They run on scalable networks like Ethereum and Solana, outpacing XRP’s 1,500 transactions per second with Ethereum’s 15,000+ TPS post-merge. Banks can even issue their own stablecoins, as seen with Société Générale’s EUR CoinVertible, bypassing XRP entirely.
XRP vs. Bitcoin: Propping Up Banks vs. Replacing Them
XRP and Bitcoin represent opposing philosophies, exposing XRP’s alignment with the fiat system and Bitcoin’s rejection of it.
XRP: A Centralized Fiat Ally
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Design and Control: XRP Ledger is centralized, with Ripple Labs holding 60% of the initial 100 billion XRP supply (55 billion still in escrow as of 2024). Validators, while technically decentralized, are heavily influenced by Ripple’s recommended list. This centralization mirrors fiat systems, where a single entity dictates supply and rules.
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Low Production Cost: Unlike Bitcoin, XRP isn’t mined—it was pre-mined at negligible cost, making it a digital printing press akin to fiat. Ripple can release XRP from escrow at will, diluting its value. This “fake” scarcity undermines its claim as a revolutionary asset.
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Goal: XRP aims to streamline bank transactions, reducing costs within the fiat framework. It’s a servant to banks, not a disruptor, preserving their dominance over finance.
Bitcoin: A Decentralized Revolution
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Design and Control: Bitcoin is fully decentralized, with no central authority. Its 21 million cap is enforced by code and secured by a global network of miners. No one can “print” more, ensuring true scarcity.
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High Production Cost: Bitcoin’s proof-of-work mining consumes vast energy—over 150 TWh annually in 2024—making it costly to produce and grounding its value in real-world effort. This contrasts sharply with XRP’s cheap creation.
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Goal: Bitcoin seeks to replace banks with a peer-to-peer system where individuals control their wealth. Its fixed supply and censorship resistance challenge fiat’s inflationary nature, aiming to dismantle centralized financial power.
In short, XRP is a cog in the banking machine, while Bitcoin is a wrecking ball aimed at the machine itself.
Stablecoins: Unstable by Nature
Stablecoins are marketed as a stable bridge between crypto and fiat, but their reliance on devaluing currencies reveals their fragility—especially XRP’s own stablecoin venture.
Why Stablecoins Aren’t Stable
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Fiat’s Flaws: Stablecoins like USDC or Tether peg to fiat (e.g., USD), inheriting its instability. The U.S. dollar lost 20% of its purchasing power from 2014 to 2024 due to inflation, per BLS data. Every country pushing its own stablecoin—e.g., a digital yen or euro—is promoting a currency that steadily devalues, not a stable store of value.
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Peg Failures: History proves stablecoins can collapse. TerraUSD (UST) imploded in May 2022, losing its $1 peg and erasing $40 billion in value. Even Tether faced a 3% depeg in 2018 amid reserve concerns. These “unstable coins” are only as strong as their backing, which is often opaque or vulnerable.
XRP’s Stablecoin: A Confession of Weakness
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In 2024, Ripple announced plans for a USD-pegged stablecoin on XRP Ledger, tacitly admitting XRP’s inadequacy. If XRP were stable or ideal for payments, why create a separate asset? XRP’s volatility—down 40% in six months during 2023—forces Ripple to lean on fiat’s illusion of stability, undermining its core narrative. This move highlights XRP’s instability, not its strength.
Stablecoins Reinforce Fiat Power
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By tying digital assets to fiat, stablecoins extend the lifespan of centralized currencies. Banks embrace them because they preserve fiat’s dominance, letting institutions maintain control over money flows. XRP’s stablecoin aligns with this agenda, reinforcing its role as a bank-friendly tool rather than a liberator like Bitcoin.
Conclusion: XRP’s Futility in a Changing World
Banks don’t need XRP. SWIFT GPI, CBDCs, permissioned blockchains, and stablecoins offer faster, safer, and more controlled alternatives, sidelining XRP’s marginal benefits. Its centralized design and low-cost creation make it a fiat clone, not a crypto pioneer, dedicated to helping banks rather than challenging them—unlike Bitcoin, which redefines money itself. Stablecoins, including XRP’s, are unstable by design, shackled to devaluing fiat and propping up the system XRP claims to enhance.
XRP’s vision is a relic of a bank-centric world, while Bitcoin points to a decentralized future. Banks will thrive without XRP, and its stablecoin gambit only proves its irrelevance.
This topic was modified 2 months ago by Bobby
