Asheesh Birla, GM – RippleNet at American Fintech Ripple, which is currently involved in a lawsuit from the US Securities and Exchange Commission (SEC), recently published a blog post, titled, “Evolving RippleNet for a Tokenized Future.”
Birla writes that cryptocurrency and blockchain or DLT are “more mainstream than ever.” He points out that there’s now “a palpable level of excitement for crypto that isn’t showing signs of slowing down – tokenization is here to stay.”
Birla adds that it’s estimated that “at least” 46 million US residents own cryptocurrency today, and many other nations are adopting this technology “at higher rates.” Major firms such as Square, Robinhood, Visa, Mastercard and PayPal are “firmly integrating crypto into their product stacks. World-famous DJs are offering exclusive NFTs to their global audiences,” Birla writes.
He also mentioned that even reserve banks are “jumping head first to the potential of crypto – about 80% of central banks are exploring use-cases involving central bank digital currencies (CBDCs),” with around 40% currently testing proof-of-concept (PoCs) programs. In June 2021, El Salvador became the world’s first nation to adopt Bitcoin as legal tender and in the United States, Miami is “taking action to make the city a hub for crypto,” Birla added.
He also mentioned that since Ripple’s inception, they have understood the great potential of crypto “to transform the financial system – from changing the way money moves across the globe through near-instant payment settlement to the way we borrow and loan money through DeFi platforms.”
Birla also shared:
“Back in 2012 when Ripple first launched, crypto and blockchain largely lacked the infrastructure, liquidity, and trust needed for adoption. There were only a few exchanges at that time doing a few million dollars a year in volume compared to traditional exchanges like Nasdaq with about 5 billion dollars in volume per day. Fast forward to today, there are hundreds of exchanges around the world doing billions in volume every day.”
With this increase in adoption, there’s a growing requirement for tokenization, the use of digital tokens “to represent ownership of any type of asset (physical or not) on a blockchain,” Birla reveals while adding that tokenization is “transforming how people buy, sell, track and manage assets – everything from art and real estate to intellectual property, equities and supply chain goods.”
The World Economic Forum (WEF) estimates that 10% of the world’s GDP will be “tokenized by 2027,” Birla noted while pointing out that with their years of experience working with Financial Institutions (FIs) on using blockchain-powered solutions, Ripple is “uniquely positioned to partner with enterprises for that future.”
According to Birla:
“There’s no question – those who don’t embrace these new technologies will be left behind.”
“Ripple is evolving. We’re expanding from a cross-border payments network to a platform providing tokenized services that will bring crypto capabilities to the enterprise and prepare them for a future where crypto is front and center. RippleNet was initially built to solve the challenges with speed, cost and transparency in cross-border payments for those that have been grossly underserved by the financial system at large.”
He added that on average the fee for consumers to send funds across borders is 7% or a $14 fee to send only $200. Similarly, SMEs experience really high costs and high expectations from their clients, Birla writes while noting that with fewer banks extending capital to SMEs since the 2008 financial crisis, these businesses “have trouble getting credit to supplement their already limited working capital (around 70% of SMEs in emerging markets lack access to credit, according to the World Bank).”
He also mentioned that delayed payments to overseas suppliers, employees or other critical partners “can be very damaging to these businesses.”
“With RippleNet, payment service providers and mid-size banks have a better way to compete and don’t have to pay huge fees that inevitably get passed down to their customers and don’t need to wait days for payments to be delivered. On-Demand Liquidity (ODL), eliminates the need for pre-funding–in cross-border payments by using XRP as a bridge between two currencies.”
As the first movers began using the product, it became evident that the companies or businesses that would find the most value would be “the PSPs and the digital-first banks – they are the ones specializing in remittance, e-commerce and SME type payments – high volume, low value–that mid to large banks have long ignored,” Birla added. He also claims that ODL is “fulfilling a real need today – ODL volume accounted for $2.4B in notional value on RippleNet in 2020.”
In October of last year, Ripple introduced Line of Credit, an extension of ODL which allows RippleNet customers “to source capital on-demand to initiate cross-border payments at scale using XRP,” Birla noted while adding that unlike incumbents who have large balance sheets that allow them to scale their business quickly, many fintechs and SME “lack the capital and resources to compete.”
He also noted:
“Before switching to RippleNet they didn’t have access to the same services as traditional FIs and were overcharged for legacy systems – sometimes even resorting to costly VC money to fund payment flows. We’re constantly building to meet the needs of our current and future customers.”
As clients were prepared to move from fiat only to crypto-enabled flows, Ripple was easily able to add new services and capabilities such as ODL and Line of Credit, Birla added while noting that in the future, every client will join RippleNet with the same base service and a wallet “designed to support both crypto and fiat.”
He explained that by adopting the wallet, clients can take advantage of the latest blockchain-based services that keep them “at the cutting-edge – the platform is designed to seamlessly upgrade and add new services as customers want them.” In the foreseeable future, clients may use their Ripple-powered wallet “to custody XRP, BTC, stablecoins, and anything that’s tokenized,” Birla confirmed.
“We saw the idea of taking a platform that can be built upon work brilliantly with Cisco starting back in the 80s – they first brought networking into the enterprise, and subsequently were perfectly positioned when the internet started to take off to easily build on that foundation, bringing customers other services like security tools and collaboration software. We are doing the same with RippleNet.”
Clients choose to work closely with Ripple because they’re “a trusted source in enterprise crypto that will help them to grow and scale their business,” Birla claims.
He also mentioned:
“When we launched ODL commercially in 2018, the payment flow required payments to be originated in fiat, converted to XRP and then again converted to fiat currency in the destination country. Over the years, we’ve refined ODL, streamlining the product to improve efficiency and experience.”
Today, ODL clients are able to send XRP for cross-border payments directly via a cryptocurrency wallet, Birla explained while noting that they are able to leverage their wallet “to source XRP on-demand instead of having to source it through a third party.”
This gives greater flexibility and choice to clients “while reducing friction in the payment flow,” Birla explained while pointing out that it also provides their clients the ability “to grow and scale quickly with new partners and currencies, by simplifying the onboarding process and enabling multiple currencies through a single wallet.”
“FlashFX, an innovative payments technology company based in Australia, was founded on the belief that smart technology is the key to unlocking the potential of global payments. They are constantly looking for new ways to integrate cutting-edge technology to bring their customers the most innovative services.”
As an ODL customer, FlashFX is one of the first service providers to connect to a customer leveraging Ripple’s new ODL model, Birla revealed while noting that as such, they’re now able “to support payments in GBP – a currency ODL didn’t support previously – as well as EUR payments.” FlashFX is only one example of a customer expanding their business with Ripple’s products,” Birla noted.
He further revealed:
“This comes on the heels of incredible global momentum for Ripple. The APAC region especially is exploding with growth and opportunity thanks to progressive crypto regulation and innovative companies looking to jump on the chance to lead in the crypto space.”
For Ripple, we’re seeing some of our “largest growth volume here,” Birla revealed while pointing out that Southeast Asia transactions increased by 10x last year, fueled by existing RippleNet clients and new connections.
New clients such as Novatti joined Ripple’s international payment network, using ODL “to enable payments from Australia to the Philippines, and we acquired 40% of Asia’s leading cross-border payments specialist Tranglo to accelerate the expansion of ODL and Line of Credit in the region,” Birla added. He also noted that as more businesses decided to add crypto-powered services, clients such as Novatti and Tranglo “play a vital role on the network as fiat on and off-ramps.”
“Today, it’s a matter of when, not if, crypto will play an integral role in the future of financial services. This industry has moved full speed ahead for the past decade and it’s only speeding up. The future belongs to those to build bridges between the traditional financial world and the new paradigm of crypto and blockchain technologies.”