Is Ripple (XRP) the future of international money transfers?

Matt Di Vincere (Chief Editor)
Last Edited Mar 31, 2023

Will cryptocurrencies ever become the future of international money transfers? Will Ripple specifically, a currency designated for payments and remittances, replace the need for international fx payments and simply serve as a global currency? in this article we will look at the current state of Ripple for money transfers and what are the prospects of that cryptocurrency in the future.

What is Ripple? A simple infographic.

Ripple, symbol XRP, is an up-and-coming cryptocurrency with a unique touch – it has been designed for a certain purpose. It is meant to simplify the process and process associated fees with the transfer of funds between banks.

It has been receiving a lot of headlines yesterday due to several factors that include Google’s early investment in the Ripple company, the drastic increase in price over 2017, and the fact it is one of few Cryptocurrency startups which are completely transparent about the way they operate and what they desire to achieve. The Ripple protocol is already trusted by more than 75 banks across the globe who chose to experiment with its payment network, and most recently American Express announced a collaboration.

How does Ripple work?

The Ripple idea goes back as far as 2004 when Ryan Fugger first came up with the idea of a digital coin. Unlike most other digital coins (later to be known as Cryptocurrencies) it was built to serve a certain purpose in the banking system. The XRP has a built-in system named the “Ripple consensus” which approves transactions quicker and more effectively, making it apt for a specific type of transactions: bank to bank transfers, currency exchange and remittances. Some industry experts have suggested it may replace current protocols like SWIFT and IBAN through a standardized protocol that can be used globally.

What is the difference between Bitcoin and Ripple?

Both Bitcoin and Ripple are cryptocurrencies, but they differ from each other in various ways. For starters, Bitcoin must be mined by miners rewarded with bitcoin, while XRP does not need mining. There is a finite amount of Ripples in the world, and no new ones will be mined.

Another big difference between them is the designation. The idea behind bitcoin is in many ways more noble – a single anonymous coin which not owned by any government or central body. Completely non-regulated. While Ripple is a coin designed specifically for bank transactions – it is centralized, and the company itself holds 60% of its tokens.

Software Engineer David Luwaga Seruyange, who specializes in bitcoin, says that the transfer costs are still a bit of an issue for Bitcoin, but Ripple has nailed it. Ripple has taken the digital currency concept and improved the platform to offer a better funds transfer experience than its competitor, Bitcoin. Bitcoin takes hours to settle a transaction, while Ripple takes seconds for a fraction of the cost.

What is the Ripple consensus process work?

In layman’s terms, the XRP is built in a manner that will enable multiple checks of each transaction made on it while using minimal resources. In other words, what Ripple creators wished to achieve is 0% error rate, minimal latency in transactions and minimum fees.

If we delve a bit diver into the mechanism we can discover that the system works in an iterative way. A transaction is checked by a certain amount of nodes in the network and when it reaches a 50% certainty it is pushed over to other nodes to recheck it, and so forth until the approval rating is sufficient.

Unless you a developer with very particular expertise in this field, it would be difficult to get an all-around understanding of the inner mechanism. This cryptocurrency has been developed for 13 years – there is a lot of depth to it.

Will Ripple change the future of money transfers?

Making future predictions on cryptocurrencies is a foolish act. It may take over the world by a storm or disappear to ashes at the same speed it has risen to the top. If cryptocurrency would take off – then it is reasonable to believe Ripple will have a significant role in such future.

Ripple is the only protocol which banks and credit companies have relatively adopted. It is designed to replace an aged protocol with obvious faults. Solving a problem like remittances fees can change the world. New: we added a review for FlashFX the only company to boast using the ripple for money transfers.

Should I be using XRP to do my international money transfers?

Recommending XRP at these current times is problematic due to large price swings (like Bitcoin!). It’s true that most of these swings are positive, and that its value has grown x5 in the past 6 months, but it can still lose 10-20 per cent at any given day. So perhaps it would be wise to use XRP or even hold it if it’s money you feel free to risk.

Another situation where you would like to use XRP is in areas where it’s difficult to transfer your money abroad.

If your aim is to transfer money from point A to point B from two western countries with modern banks and availability for money transfer services, we would recommend them over XRP for now.

How to buy XRP

It’s not as easy as we would like it to be. The best way we found is sites like Coinbase, buy bitcoin and then exchange it to Ripple. The XRP to BTC exchange costs are very marginal and the transaction would still be very cheap (the cost of buying bitcoin on Coinbase is around 1.5% for U.S citizens, and the actual transaction is something like 0.001% of the value).

The ongoing SEC lawsuit against Ripple

The SEC lawsuit against Ripple Labs began in 2020 when the United States Securities and Exchange Commission (SEC) filed suit against the company and its current and former CEOs. Ripple Labs, founded in 2012, developed the RippleNet network to facilitate low-cost and speedy cross-border money transfers using its cryptocurrency, XRP. The company’s founders used XRP to raise funds in 2013, leading to the SEC’s allegations.

The SEC claims that Ripple Labs held an unregistered initial public offering (IPO) of XRP, raising funds through the sale of unregistered security offerings to investors worldwide. Furthermore, Ripple offered billions of XRP in exchange for non-cash services like market-making and labour. The lawsuit alleges that Ripple’s executives failed to register XRP offers and sales, violating federal securities laws’ registration restrictions.

According to the SEC, XRP is a security, a traded financial instrument representing ownership in a corporation or similar entity without utility. XRP tokens were used to fund Ripple’s platform, which facilitates money transfers for retailers, and the sales of XRP enriched the platform’s management. However, Bitcoin (BTC) is not considered a security by the SEC.

The SEC uses the Howey test, established in the 1946 Supreme Court case United States SEC vs. Howey, to determine if a transaction is an investment contract under the Securities Act of 1933. The test focuses on the investor’s control over the profit. If investors have no influence over the asset, it is generally considered a security. The SEC determined that XRP satisfied the Howey test’s requirements.

Ripple Labs chose to fight the lawsuit instead of settling, as most companies do. Ripple’s lawyers argued that the SEC never warned or notified the company that XRP could be classified as a security. Ripple believes the SEC is biased in applying the security concept to cryptocurrencies like XRP, potentially weakening the commission’s authority and credibility.

The Ripple vs. SEC lawsuit’s resolution remains uncertain, affecting the company’s business prospects and XRP holders’ ability to trade the digital asset. Key events in the lawsuit include the SEC filing the lawsuit in December 2020, Coinbase delisting XRP, and various court proceedings and deadlines throughout 2021 and 2022. The case has implications for the future of cryptocurrency regulation and the SEC’s treatment of digital assets.


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