Ripple as a solution for central banks? – World Economic Forum mentions XRP with CBDCs

With XRP, Ripple has been trying to appeal to various banks and payment service providers for years. But so far, interest in the USD startup’s payment solutions has been modest. Although Ripple already has many large banks under contract, the interest is almost exclusively directed towards the RippleNet, which works without XRP.

There is currently a lot of discussion in the Ripple community about digital currencies of the central bank (CBDC) and how could it be otherwise, Ripple will play a central role with XRP . The fans usually refer to the World Economic Forum (WEF), which mentioned XRP in connection with CBDCs in a report earlier this year.

World Economic Forum mentions XRP

In a report released earlier this year, the WEF found that central banks and government agencies are examining the potential of CBDCs to solve persistent global financial problems such as financial integration and payment system stability. The Geneva-based international organization also made a clear distinction between CBDCs and cryptocurrencies.

The CBDC is a digitized version of a sovereign currency that is created and issued by the country’s monetary authority and is a liability of the country’s monetary authority. The CBDC is different from other forms of digital or virtual currency, including cryptocurrencies like bitcoin and ’stablecoins‘, which are not issued by central banks or are typically legal tender.

Although the WEF draws a clear line between the two forms of digital assets, it names XRP as the most relevant cryptocurrency in the CBDC wholesale room for payments and settlement within or between banks.

Ripple with ODL and XRP for international payments

In a recent blog post, Ripple notes that central banks around the world are in an arms race to develop their own CBDCs. Ripple also explains how central banks can use XRP to facilitate and support the use of CBDCs.

RippleNet’s On-Demand Liquidity (ODL) solution enables financial institutions to trade across multiple global markets in real time using the digital asset XRP, and such a solution can also support the direct exchange of CBDCs. XRP is faster, cheaper and more scalable than any other digital asset, which makes it the ideal tool for bridging two different currencies quickly and efficiently.

All of this certainly doesn’t sound too bad for one or the other. Ripple already has large partnerships with banks, XRP has been in the top 5 cryptocurrencies by market capitalization for a long time, other organizations keep mentioning Ripple and XRP and lots more good news. That is reason enough to believe in a bright future for Ripple and XRP.

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Don’t forget the bad fundamentals

But in the end it is always only small glimmers of hope that are regularly thrown at investors. The WEF report is from January 2020 and since then, at least in terms of course technology, not much has changed at XRP. In addition, it must be mentioned that XRP does not stand alone in the field “Payments and settlements within or between banks”. Before that, namely the JP Morgan Coin, which also wants to make a similar solution available to the banks.

What Ripple writes in his blog post is also pure theory. Currently, XRP would not be able to map the volumes that banks send to one another on a daily basis. The trading volume is nowhere near enough and has to be artificially kept alive with market makers. In addition, XRP is dependent on the Bitcoin price and is therefore more volatile than BTC itself.

In addition, Ripple still holds over 55% of all XRP that they sell or invest each month. There is no reason to use a fictitious cryptocurrency that is not linked to any other currency or the like. Unless you want to support the company behind the token in solidarity. Because Ripple’s main source of income is still the sale of the XRP.