As XRP holders step closer to having their day in court against the U.S. Securities and Exchange Commission, Ripple Lab is now refocusing on a hot new business: central bank digital currencies.
Embroiled in legal troubles, Ripple is now seeking ways to apply the technology underlying its XRP cryptocurrency to helping central banks make their digital currencies more interoperable and useful outside their national borders. According to a CBDC white paper published this week by Ripple, XRP can be a “neutral bridge currency” for CBDCs. This follows Ripple’s announcement earlier this month that it was piloting a private ledger for central banks to issue and manage digital currencies.
Ripple’s CBDC white paper comes as a judge granted the application by XRP holders’ attorney John Deaton to practice “pro hac vice” — which gives a lawyer licensed in another jurisdiction temporary permission to appear in court for the case, according to a court filing this week.
U.S. District Court Judge Analisa Torres had earlier rejected XRP holders’ bid to intervene in the SEC’s lawsuit on procedural grounds as the XRP holders had neglected to file a pre-motion letter — a letter to the judge from the attorney explaining the rationale for the intended application — that her court rules required before any motion can be filed. Deaton subsequently submitted a pre-motion letter for XRP holders to intervene as third-party defendants in the lawsuit. The request is now pending the court’s decision.
See related article: XRP holders seek to join Ripple in fighting SEC lawsuit
Last December, the SEC filed a lawsuit against Ripple, alleging that its sale of XRP was an unregistered securities offering worth over US$1.38 billion. The SEC also named Ripple’s executive chairman Chris Larsen and CEO Brad Garlinghouse as co-defendants for allegedly aiding and abetting Ripple’s violations and making US$600 million in personal profits from their unregistered sales of XRP.
The case is being closely watched by the cryptocurrency industry given the potential impact on XRP investors and the legal precedent it could set for other cryptocurrencies. Following the SEC’s lawsuit in December, major cryptocurrency exchanges, including Coinbase and Kraken, delisted XRP trading services for U.S. residents, which sent XRP prices tumbling. but Ripple continues to enjoy strong support in parts of Asia, including Japan.
XRP is the seventh largest cryptocurrency in the world with a market capitalization of more than US$27 billion. The price of XRP has increased by over 20% in the past two weeks and is currently trading at US$0.57 as of publishing time, close to the level in December before the SEC’s lawsuit.
The SEC’s lawsuit against Ripple is now in its discovery phase, and the two sides are now battling over what information they need to share with the other side. In another court filing this week, the SEC pushed back against the request by the defendants — Ripple, Garlinghouse and Larsen — regarding document discovery related bitcoin, ether and other internal SEC documents.
“Defendants request discovery far beyond anything that could be considered relevant or proportional to the needs of this case,” the SEC stated in a letter to Magistrate Judge Sarah Netburn of the Southern District of New York.
See related article: SEC: no duty to warn about XRP; denies Ripple’s fair notice defense
XRP a bridge currency for CBDCs
In the white paper titled “The Future of CBDCs: Why All Central Banks Must Take Action,” Ripple noted the global rise of government-backed digital currencies and the different reasons driving central banks to explore CBDCs, including promoting financial inclusion, improving the existing payments infrastructure and fostering innovation.
“It is likely that we will end up with a world of diverse CBDCs, which makes interoperability critical. Though most central banks are focused on solving domestic problems, the global nature of trade and finance means cross-border coordination must be baked into the original recipe of each CBDC,” the white paper stated.
If CBDCs adopt open payments protocols and use an independent, third-party bridge, they would be able to facilitate faster and cheaper payments across borders, the white paper said.
“A neutral bridge asset can support healthy, alternative liquidity markets that will allow for frictionless and cost- effective value movement between various CBDCs in real-time. It would also enable the exchange of less liquid CBDC pairs and increase global competition by lowering entry barriers to new and smaller market participants.” Ripple stated in the white paper.
“To enable a truly efficient global market, a bridge currency must be specifically optimized for payments and support the same speed, scalability, low cost and security that CBDCs will provide,” the white paper stated. “One example of a neutral bridge is the digital asset XRP, which can be used to bridge two different currencies quickly and efficiently.”
According to a recent report by CPA Australia, France’s central bank is already considering Ripple and XRP as a potential platform for CBDC issuance.
There’s undeniable momentum behind Central Bank digital currencies. Are they the next evolution digital #payments? Download our #CBDC Whitepaper to find out. https://t.co/A0w7s39Ju8
— Ripple (@Ripple) March 20, 2021
Ripple turns to Southeast Asia
Last week, Ripple announced the appointment of Brooks Entwistle as managing director of Southeast Asia to lead and scale the company’s operations in the region.
Entwistle, who is based in Singapore, was previously chief business officer at Uber International, where he led the company’s expansion in Asia Pacific, which included navigating the region’s regulatory challenges. Prior to Uber, Entwistle was partner and chairman of the Goldman Sachs’ Southeast Asia business.
“Southeast Asia’s payments ecosystem is extremely dynamic with fairly complex, country-specific schemes which require a lot of in-depth knowledge,” said Asheesh Birla, general manager of RippleNet — Ripple’s payments network for financial institutions — in a press release. “The adoption of RippleNet among the region’s many fintechs, payments service providers and SMEs makes Southeast Asia our biggest market for both customer demand and transaction growth.”
According to Ripple, Southeast Asia is the company’s fastest growing region. The number of deals signed in Southeast Asia more than doubled in 2020 compared to the year before, and transactions on RippleNet — Ripple’s payments network for financial institutions — grew 10 times year-on-year.
Ripple’s customer base in Southeast Asia includes BKK Forex, a licensed remittance and foreign exchange company in Singapore; iRemit, the largest non-bank remittance service provider in the Philippines; and Siam Commercial Bank in Thailand, which had over half a million transactions on RippleNet in 2020. The bank’s app runs on RippleNet and allows customers to send money in real-time and with low cost to family and friends abroad from their mobile phones.