Ripple's Chief Technology Officer Responds to Six Critical Inquiries Regarding XRP in Bid to Outmatch SWIFT's Position
Ripple's Chief Technology Officer (CTO), David Schwartz, has shared his rationale for the company's preference for XRP over stablecoins as a bridge currency in a multi-stablecoin world.
Minimising Volatility Risk
In cross-border transactions, XRP is only held momentarily, significantly limiting exposure to its price volatility. This short-term use makes the volatility less of a practical concern because the asset is not held long enough for price swings to have a major impact on the transfer.
Liquidity and Jurisdictional Neutrality
XRP offers broad liquidity and scalability, allowing instant settlement and seamless conversion between multiple fiat currencies or tokenized assets. Unlike stablecoins, which depend on trusted issuers and can face regulatory and accessibility issues across different jurisdictions, XRP’s decentralized nature and neutrality make it more adaptable globally.
Fragmented Stablecoin Environment
In a landscape where multiple stablecoins coexist, no single stablecoin dominates across all fiat pairs. This fragmentation makes a neutral digital asset like XRP essential as a universal bridge currency to enable conversions across various stablecoins or fiat currencies.
Demand from Liquidity Providers
For a bridge currency to function effectively, it must be held and available when needed. Liquidity providers hold XRP to facilitate efficient trading and cross-market payments, supporting its continued use and relevance in Ripple's ecosystem. XRP being dominant reduces exchange costs, as users can convert it cheaply to whatever asset they require next.
Complementary Role with Stablecoins
While stablecoins such as Ripple’s RLUSD are valuable for use cases needing price stability—like collateral or maintaining a fixed value—XRP and stablecoins serve distinct but complementary purposes within Ripple’s payment platform. XRP’s role focuses on liquidity and bridging, whereas stablecoins provide stability in certain contexts.
Unlikelihood of a Single Stablecoin Dominating
Schwartz argues that the stablecoin market will remain fragmented because a single stablecoin cannot cover every use case or jurisdiction effectively. This preserves the need for a bridge asset like XRP in global payment systems.
In addition, Schwartz addressed concerns about XRP's on-chain volume and missing ledgers on the XRPL. He also noted that Ripple has separately licensed entities in many jurisdictions for its enterprise payment products. Interoperability and asset portability are important factors for institutions, according to the Ripple CTO, with giants like BlackRock potentially using the XRP Ledger for tokenization instead of building their own blockchain.
Ripple CTO David Schwartz also did not discuss why foreign countries would trust a U.S.-based private company payment network, nor did he address whether XRP will still be necessary when stablecoins cover most pairs in the future. However, his comments provide insight into Ripple's strategic thinking regarding the role of XRP in the company's operations and its potential in a multi-stablecoin world.
In the multi-stablecoin world, XRP serves as a bridge currency, minimizing volatility risk due to its short-term use and limited exposure in cross-border transactions. Unlike stablecoins, which may face regulatory and accessibility issues in different jurisdictions, XRP's decentralized nature and neutrality offer broader liquidity and adaptability on a global scale, complementing the roles of stablecoins in Ripple's payment platform.
