Twitter user @Hodor, a strong supporter of Ripple company’s XRP cryptocurrency, recently published a blog post in which he wrote that the Financial Stability Board (FSB), an international organization monitoring global financial policy, had said crypto assets could “become a [preferred] option” when conducting cross-border transactions.
Specifically, the FSB had released a report in which it mentioned that crypto assets “may become an option where current payment or banking services are less convenient or are slow and/or expensive.”
Crypto Assets Could Help In Cross-Border Transactions
The FSB pointed out the high costs associated with remittance payments and that “it remains to be seen” whether crypto assets might be increasingly used “as an alternative to traditional … banking services.”
According to Hodor, the FSB “correctly identified the cross-border value transfer use case” for crypto assets - particularly XRP. He added that on October 3rd, the European Parliament had said distributed ledger technology (DLT) could help reduce transaction costs “by removing intermediaries.”
Additionally, the FSB had called for more regulatory clarity and emphasized that small-and-medium sized enterprises (SMEs) could “benefit from disintermediation” facilitated by DLT based solutions - as it would allow for more cost-effective transactions.
Hodor thinks “global leaders are paying very close attention to what Ripple has been saying” because these are some of the areas that Ripple Labs’ DLT-powered technology aims to improve.
"Strong Alternative" To SWIFT
He also predicts that existing SWIFT customers “may start to examine”, or consider using RippleNet, which the American fintech claims is a decentralized network of financial institutions using Ripple’s suite of financial products.
As explained by Hodor in his blog, RippleNet may be seen as “a strong alternative to SWIFT messaging in some circumstances … [and] a complement to their existing SWIFT capabilities.”
On October 6th, CryptoGlobe reported that Dr. Jerome Rousselet, a theoretical computer scientist, had identified three segments in the crypto and blockchain ecosystem:
- the protocol layer: the cryptocurrency platforms,
- infrastructure: crypto exchanges, wallets, mining equipment manufacturers and miners, custodial solutions,
- distributed applications: B2B, B2C services
Addressing Two Layers Might Lead To "Losing Focus"
Rousselet had also mentioned that “trying to address two layers is very challenging” as there may be a “high risk of losing focus and under delivering.”
In Ripple company’s case, it has defined and is currently in the process of implementing various different payment/transaction protocols (xRapid, xVia, xCurrent) through partnerships with over 120 financial institutions and other types of collaborative projects.
This means that Ripple, as a company, must have invested significant amounts of resources into developing these financial products. However, the US-based fintech might be attempting to take on more than it can handle because it’s not only working on protocol layers, but also appears to be working on (supportive financial) infrastructure development.
SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunications, is a time-tested and established system that allows financial institutions worldwide “to send and receive information about financial transactions in a secure, standardized and reliable environment.”
Founded in 1973, SWIFT employs over 2,000 people to manage its operations and only specializes in securely “transporting financial messages.” It does not hold or assist in the transfer of the actual funds (or money).
SWIFT Partners With Ripple's Partner, Santander Bank
Ripple Labs, which was founded in 2012, only has around 150-200 employees - yet it claims to have already developed products that can not only transfer financial assets, but can also provide a better alternative to SWIFT’s messaging system.
Interestingly, SWIFT recently announced its partnership with Santander bank on October 11th as the large Spanish financial institution plans to introduce its services in countries including the UK, Poland, Spain, and Argentina.
The partnership will involve Santander using SWIFT’s global payment innovation (gpi) service for cross-border transactions; and it’s also expected to be adopted in Mexico toward the end of 2018. Notably, SWIFT is set to host its SIBOS 2018 Conference starting on October 22nd and many people are now speculating that Ripple may partner with SWIFT.