XRP is the cryptocurrency for financial institutions. Other digital currencies were created primarily to be used by individual consumers as an alternative to fiat currencies, but XRP was specifically designed to address the pitfalls of global finance.
Ripple Labs, the company behind XRP, created the digital asset to serve as a bridge currency for international transactions. Utilizing Ripple’s decentralized blockchain, the XRP Ledger (XRPL), XRP enables fast, low-cost, and energy-efficient international money transfers. Its proven value in global finance has established XRP as one of the top cryptocurrencies by market cap.
XRP’s Utility in Global Finance
XRP is the solution to the inefficiencies and high costs of cross-border payments. Traditional systems often take days to settle transactions and involve intermediaries, which adds extra fees and time to the process. This is the problem XRP was created to resolve, and it does so by allowing financial institutions to make international transfers in real time without excessive fees.
The transaction time for XRP is a quick 3–5 seconds, as opposed to 10+ minutes or hours. Fees are typically a fraction of a cent. Because there’s no need for intermediaries with its decentralized blockchain protocol, institutions forgo the additional costs that usually come with facilitating transfers across borders.
Using XRP, Ripple also offers a unique payment solution known as on-demand liquidity (ODL). With XRP’s functionality, ODL enables institutions to almost instantaneously convert their local currency to XRP, transfer it across the XRPL, and convert it into the receiver’s local currency. The quick process ensures banks, countries, remittances, and other financial institutions can maximize competitive rates and ensure sufficient liquidity.
Global institutions, including Santander, SBI Remit, and American Express, have partnered with RippleNet, the company’s payment network, validating XRP’s real-world application as a bridge currency.
Scalability & Sustainability Give XRP a Competitive Advantage
The XRPL boasts a scalability of 1,500 transactions per second (TPS). To add perspective, Bitcoin manages about 5–7 TPS, and Ethereum can handle around 20 TPS. Instead of processing one individual transaction at a time, XRP achieves this scalability by allowing thousands of payments to be settled at once, so as not to hold up the blockchain protocol.
XRP’s protocol again differentiates itself from other digital currencies. Rather than mining or staking, it relies on a consensus mechanism that uses individual validators. Options like Proof-of-Work require more energy consumption, so to be a viable and appealing option for its market of large financial institutions, XRPL uses a more energy-efficient protocol that enables faster transactions.
Legal Milestones Boosting Market Confidence
A landmark moment in XRP’s popularity started in 2020 when the U.S. Securities and Exchange Commission (SEC) opened a case against Ripple, alleging that XRP was being utilized as an unregistered security. In 2023, a court partially ruled in Ripple’s favor, agreeing that XRP sales on public exchanges did not violate securities laws as XRP is not a security.
Ripple was under scrutiny during those few years, and XRP was delisted from cryptocurrency exchanges. With U.S. regulatory clarity, XRP became one of the few cryptocurrencies backed by an explicit legal definition. This welcomed XRP back to major cryptocurrency exchanges and reinforced its validity as a digital asset.
Following the ruling, XRP rejoined the cryptocurrencies topping the list in market value, interest grew, and investor trust was restored. Financial institutions turned to XRP as a legitimate option for their payment systems, feeling reassured and secure in its regulatory clarity.
Expanding Global Partnerships
As more institutions join RippleNet, Ripple is expanding global partnerships by building payment corridors that use XRP as a cross-border currency. From Latin America to Southeast Asia, regions needing better financial services for their remittance flows benefit from Ripple’s ODL to facilitate real-time transactions.
XRP’s speed, low cost, and energy efficiency were designed to fill the gap where traditional systems and other cryptocurrencies fall short. XRP can improve global finance and become a key component of the global financial infrastructure. Its growing impact on high-remittance markets is expected to drive up price over time, increasing XRP’s value and perception as a strategic digital asset. As XRP expands in global partnerships, so does worldwide financial inclusion.