Three financial firms have just taken xRapid commercial, enabling cross-border transactions using Ripple’s XRP cryptocurrency in a matter of minutes—but these ripples aren’t turning into waves on the market just yet.
It’s a major bit of news for the third-most-valuable digital currency on the market, but XRP’s legal status is still cloudy and the SEC hasn’t said whether it’s a security or not.
So for now, this major breakthrough isn’t doing much for XRP prices. Ripple was even trading down 4 percent on Tuesday morning:
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It should be a pretty big development. After all, it’s the first time that XRP will be used in commercial application by three financial services firms—payment providers Mercury FX and Cuallix, and financial firm Catalyst Corporate Federal Credit Union.
But what’s missing are banks.
While Ripple predicts that “dozens” of banks will be using XRP by the end of next year, we’re not quite there yet, and the first are most likely to be those focused on money transfers to emerging markets.
Again, it’s a regulatory question and banks deal with emerging markets have more “forward-looking regulation” and as such are positioned to be the eventual first adopters, according to Ripple itself. Big lenders won’t be jumping on board until there’s quite a lot more clarification on the regulatory field—and because Ripple’s business model has financial institution deals as a core revenue source, this first commercial breakthrough doesn’t look as big below the surface.
XRP managed to hit a high a couple of weeks ago when Ripple Lab’s had its head of regulatory relations for Asia-Pacific and the Middle East give an interview to CNBC where xRapid was promoted, giving XRP prices a sharp boost. But it was short-lived—even with Bill Clinton taking the stage at Ripple’s big Swell event. Related: Why Gold Investors Should Pay Attention To The Swiss Franc
As it stands, XRP has lost 80 percent since last year’s big surge when it hit over $3 dollars after seeing only $0.006 in 2017.
But it’s still in the running for the No. 2 crypto, hoping to unseat Ethereum.
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Still, it should be a major feather in Ripple’s cap—regulatory uncertainty aside.
Speaking to Fortune, MercuryFX CEO Alistair Constance said the economics of joining xRapid’s early testing was brilliant. They ran two pilots that saw them send several thousand dollars to a charity in Mexico and the result was a lot cheaper, and a lot faster.
According to Constance, using the SWIFT international payments network took 2-3 days and cost $40-$75 dollars per transaction, while xRapid allowed them to make transactions in two minutes for less than 2 cents.
Everyone is waiting for the regulatory bad news. Right now, it’s pure uncertainty, but if regulators decide to classify XRP as a security, the commercial adoption of xRapid could stop where it’s started.
Ripple has seen a collection of lawsuits claiming that XRP is a security.
In late August, a California Superior Court suit filed by an investor was formally designated as “complex litigation”, Coin Desk reports, while another similar suit was deemed complex in June.
But the SEC has refrained from making distinctions yet as to which cryptocurrencies are securities, and which aren’t. This uncertainty has kept the entire cryptoworld in limbo.
Earlier this week, in fact, a group of U.S Congressmen called on the SEC to make a clear distinction
“[…] It is important that all policymakers work toward developing clearer guidelines between those digital tokens that are securities, and those that are not, through better articulation of SEC policy, and, ultimately, through formal guidance or legislation,” the lawmakers wrote in an open letter.
“Current uncertainty surrounding the treatment of offers and sales of digital tokens is hindering innovation in the United States and will ultimately drive business elsewhere. We believe that the SEC could do more to clarify its position.”
By Fred Dunkley for Safehaven.com
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