For over a decade, Ripple has been exploring a fundamental blockchain use-case: efficient cross-border payments. Using the XRP ledger, the company allows people to send and receive funds at much lower rates than they\u2019d be charged by traditional banks. <\/p>\n
In the fourth quarter of 2021, the average fee to send US$200 across borders<\/a> was six per cent. In comparison, Ripple facilitates transactions at a standard rate which, at present, is a very small fraction of a cent. <\/p>\n With the digital remittance market projected to grow annually by 15 per cent<\/a> by 2030, the need for blockchain-based finance solutions is more apparent than ever. <\/p>\n \u201c[Blockchain solutions bring] a clear economic benefit to these markets,\u201d says Rahul Advani, Ripple\u2019s Policy Director in the Asia Pacific (APAC) region. <\/p>\n Digital assets enable micropayments and remove friction from the remittance process. People no longer need to wait till they have a large amount of money to send \u2014 they can send as little as a dollar everyday, and still end up paying less in cumulative transaction fees. <\/p>\n At a panel discussion this August<\/a>, J.P. Morgan\u2019s Umar Farooq claimed that once regulations catch up in the crypto space, transaction fees will increase as well. <\/p>\n [Bank transfers] are expensive, but this is because of reasons such as AML, KYC, and last-mile transferability. Once the regulatory arbitrage between the crypto and TradFi industry becomes smaller, the delta is not going to be that big.<\/p>\n \u2013 Umar Farooq, CEO, Onyx by J.P. Morgan<\/cite><\/p><\/blockquote>\n From Advani\u2019s perspective, this argument isn\u2019t entirely valid. <\/p>\n \u201cCompliance does cost, but the reality is that the friction in traditional rails isn\u2019t from compliance costs,\u201d he says. \u201cIf you look at the correspondent banking model, you have to have pre-funded accounts, and that ties up capital, which makes transfers more expensive.\u201d<\/p>\n Ripple addresses this problem by offering on-demand liquidity. The XRP crypto token acts as a bridge between fiat currencies, and transactions can be settled in a matter of seconds. <\/p>\n \u201cYou no longer have to pre-fund your destination correspondent banking accounts,\u201d Advani explains. <\/p>\n Given this scenario, even if compliance costs were to increase in the crypto space, players like Ripple would still have an edge over traditional payment solutions. <\/p>\n \u201cThe issue is not compliance, the issue is pre-funding,\u201d he adds.<\/p>\n In recent years, an increasing number of banks and financial institutions have started exploring the benefits of blockchain technology. Ripple is working with over 100 such institutions including Santander and Canadian Imperial Bank of Commerce. <\/p>\n Firms including Goldman Sachs and J.P. Morgan are experimenting with the use of blockchain-based networks for securities trading as well. <\/p>\n While the crypto winter<\/a> has heavily impacted cryptocurrency prices and the speculative side of the industry, real blockchain use-cases continue to thrive. Ripple is seeing record levels of growth, even with the XRP token down over 85 per cent from its all-time high.<\/p>\n In terms of on-demand liquidity, we\u2019re going to be doing US$15 billion this year. That\u2019s the highest it has ever been. We\u2019re growing at 8x, 9x year-on-year. That\u2019s because we solve a very real problem.<\/p>\n \u2013 Rahul Advani, Ripple\u2019s Policy Director, APAC<\/cite><\/p><\/blockquote>\n As blockchain-based solutions disrupt the finance industry, Ripple sees collaboration as the way forward. <\/p>\n \u201cSince we started building 10 years ago, our approach was very clear that we needed to involve traditional banks. Banks play a very important role in the ecosystem,\u201d Advani continues. \u201cWe don\u2019t see us as working at opposite ends. We\u2019re working together to provide benefits to the broader economy.\u201d <\/p>\n Global regulations will have a significant say in the future of blockchain technology. Since 2020, Ripple has been involved in a court case which could have significant consequences, not just for the company, but the wider crypto industry. <\/p>\n The lawsuit \u2014 filed by the US Securities and Exchange Commission \u2014 alleges that Ripple\u2019s native crypto token XRP should be treated as a security rather than a currency. <\/p>\n \u201cThis case is going to set precedent one way or another, and we don\u2019t want it to set a negative precedent because that could affect many other tokens out there,\u201d says Advani. <\/p>\n As Ripple CEO Bradley Garlinghouse told CNBC, if Ripple loses the case, most crypto tokens in the US would be deemed securities. Their respective issuers would have to register with the SEC as broker dealers. \u201cThat\u2019s cost, that\u2019s friction,\u201d explained Garlinghouse. <\/p>\n Advani believes this is an example of the US lagging behind in terms of its crypto regulations. \u201cThere\u2019s no other jurisdiction anywhere in the world that has indicated that XRP is a security.\u201d<\/p>\n In countries including Singapore, Japan, and UK, there\u2019s clear taxonomy differentiating between digital payment tokens and securities. \u201cThe US is a unique situation because it really doesn\u2019t have that regulatory clarity.\u201d<\/p>\n The regulatory clarity in Singapore is one of the primary reasons why Ripple chose the country for its APAC and MENA headquarters. <\/p>\n The industry is moving at a breakneck speed. A lot of regulators are playing catch up. Singapore is ahead of the curve and as a regulator is open to discussions with the industry. You can sit in with the Monetary Authority of Singapore (MAS) and exchange views quite openly.<\/p>\n \u2013 Rahul Advani, Ripple\u2019s Policy Director, APAC<\/cite><\/p><\/blockquote>\n While other companies have jumped ship in recent years, Ripple uses Singapore as a benchmark for other jurisdictions. Advani believes that the MAS\u2019 views around crypto have been consistent, going as far back as 2017. <\/p>\n \u201cWhat you don\u2019t want to see is a race to the bottom,\u201d he says about Singapore\u2019s DPT licensing requirements. \u201cWhat\u2019s the point of a regulatory framework if anyone can get a license?\u201d <\/p>\n The crypto winter has spurred on regulatory talks in areas such as crypto lending, which were previously uncovered by the MAS and other policymakers. <\/p>\n Advani believes that any sort of regulatory clarity is only going to be beneficial. \u201cWe will work with regulators to ensure that our views are incorporated into any sort of framework which is implemented.\u00a0<\/p>\n In Ripple\u2019s view, MAS\u2019 policies have been generally positive, however, Advani shares concerns about the language which is used in regulatory talks and documents. <\/p>\n As an example, he refers to the opening address by MAS\u2019 Managing Director Ravi Menon at a recent Green Shoots seminar<\/a>. Menon\u2019s speech was titled, \u2018Yes to Digital Asset Innovation, No to Cryptocurrency Speculation\u2019. <\/p>\n \u201cWhat we feel is speculation isn\u2019t unique to crypto,\u201d says Advani. \u201cWe\u2019ve seen speculation in other markets. It\u2019s not a new thing.\u201d He adds that if it weren\u2019t for crypto, people would be speculating on other asset classes, whether it\u2019s whiskey bottles or Rolex watches. <\/p>\n \u201cWe think the view should be \u2018Yes to Innovation, No to Speculation\u2019, full stop. It shouldn\u2019t be specific to cryptocurrencies and digital assets,\u201d he adds.<\/p>\n For a regulator promoting blockchain innovation, using technology-neutral language is important. Otherwise, it appears as if speculation and poor risk management are issues which are exclusive to digital assets. <\/p>\n Crypto assets are not bad. The technology underlying them is not bad. It\u2019s how you use them that could be. That\u2019s true with any technology. Take the traditional securities market for example, and what happened during the global financial crisis.<\/p>\n \u2013 Rahul Advani, Ripple\u2019s Policy Director, APAC<\/cite><\/p><\/blockquote>\n Advani elaborates using fraud as an example. \u201cWhether it\u2019s on Carousell selling fake concert tickets, or doing a rug-pull in crypto, it\u2019s equally bad. They can both be addressed with the frameworks in place. There\u2019s no need to say speculation in crypto assets is bad. Speculation is bad, full stop.\u201d<\/p>\n Featured Image Credit: Ripple<\/em><\/p>\n Also Read: <\/strong>From mass adoption to regulation: VCs and execs discuss the future of crypto to navigate ahead<\/strong><\/a><\/em><\/p>\n<\/div>\n !function(f,b,e,v,n,t,s){if(f.fbq)return;n=f.fbq=function(){n.callMethod?Low crypto transaction fees: is it sustainable?<\/h2>\n
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Are TradFi institutions getting left behind?<\/h2>\n
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Dealing with regulatory changes<\/h2>\n
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<\/a>Singapore leads the way<\/h2>\n
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Regulatory missteps<\/h2>\n
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