Just over a year ago, Ripple CEO Brad Garlinghouse said XRP (XRP -0.02%) could take 14% of SWIFT’s volume by 2030. That was ambitious when he said it, but today it seems almost impossible. XRP payment volumes are trending downwards, and SWIFT — the international banking network that underpins the majority of international transfers through a secure messaging system — is proving it can integrate blockchain solutions.
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The big advantage of blockchain transactions is that they are faster and cost less than traditional finance. Ripple’s XRP was designed as a bridge asset, a common currency to settle cross-border payments, and its appeal was that it could compete with SWIFT by slashing costs and settlement times. SWIFT processes the equivalent of the world’s GDP roughly every three days, and taking even a small fraction of that could have been monumental for XRP.
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However, as both SWIFT and traditional finance embrace digital assets on their own terms, XRP’s utility falls away.
How Swift is embracing the blockchain
Last week, Standard Chartered and HSBC carried out their first bank-to-bank transfer of tokenized deposits using SWIFT’s blockchain ledger. SWIFT has been developing its own ledger since last autumn and announced in July that its blockchain pilot, which included 17 major banks, was ready for use.
This first transfer is a significant milestone, as it demonstrates that SWIFT can adapt to this new technology rather than being replaced by it. The pilot uses tokenized deposits, meaning banks convert traditional currencies held by the bank into transferable tokens, rather than using an existing crypto like XRP or a stablecoin. That doesn’t bode well for XRP.
Indeed, what’s become clear in recent years is that existing financial players won’t just sit by and watch as cryptocurrency projects eat into their market share. The incumbents combine the benefits of blockchain technology with their reputations, customer bases, and relationships. For example, SWIFT boasts relationships with over 11,500 institutions in more than 200 countries.
XRP’s fading use case
XRP remains one of the top 10 cryptos by market capitalization, and it had enormous potential when it launched in 2012. However, today the hype has got ahead of reality, and SWIFT’s successful push into blockchain adoption is just part of XRP’s problem.
The crux is that tokenized bank deposits and stablecoins offer a more compelling form of payment and money transfer than XRP. They are both pegged to traditional currencies, making them less volatile, and they benefit from more regulatory protection, making them safer.
This is a challenge for many cryptocurrencies, and the ones most likely to succeed in the long term are those that can work alongside traditional finance rather than attempt to replace it. As a company, Ripple is already doing exactly that. It has issued its own stablecoin and acquired Rail, a stablecoin platform, but those moves benefit Ripple, which is the private company behind XRP, and Ripple’s shareholders, not XRP holders.
SWIFT is still relatively new to the blockchain party, and XRP’s ability to bridge different currencies — for example, moving dollars into euros — could still be useful. However, I’m still waiting to see whether XRP can adapt to the emerging hybrid of blockchain and traditional finance, and I certainly can’t see it competing with SWIFT anytime soon.
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