Miguel Vias, the head of XRP markets at Ripple, appeared on the Epicenter podcast to discuss XRP and its expanding role in global payments. If you haven’t had a chance to listen in yet, here are 5 key takeaways from his conversation with Epicenter’s hosts, Brian Fabian Crain and Meher Roy:
1. There are strong similarities between digital currencies and more established, traditional markets.
Prior to joining Ripple, Miguel worked at Chicago Mercantile Exchange (CME), the world’s largest futures exchange, running the precious metals desk/product suite. The transition from trading precious metals to the world of cryptocurrency was a fairly intuitive transition; there are significant similarities between the two. Bitcoin has long been called ‘digital gold’ due to the fact that digital currency doesn’t degrade, the immutability of the asset, and its limited supply. Another lesser-discussed similarity, however, is both precious metals and digital currencies exhibit volatility. After the recent Bitcoin/ETF decision, the markets have caught many people off-guard, causing them to expect cryptocurrency prices to ‘fall out of the sky’ (i.e. sharply drop), but after taking a minor dip, they came right back up. This, among many other examples of digital currency price fluctuations, has given investors and speculators a lot of confidence in digital currencies.
2. We’re still in the early days of digital currency, but we know what they need to do to be successful.
While digital currency has advanced significantly over the past several years, it’s good to remember that we’re still in the early days – the market capitalization is about $30 billion, compared to capital markets, foreign exchange, securities, etc. which will do about $30 billion in trading over the course of a few hours. This observation isn’t to belittle digital assets, but rather point out that there is still a ways to go before reaching the goal of institutional liquidity.
That said, we’re at the point where having a clear use case is a key indicator of future success. It’s unlikely that a single asset or ledger will be an ultimate “winner” in the space as different companies will own different utilities. For example, XRP is uniquely positioned to create more competitive foreign exchange markets for cross-border payments. Other coins may serve a different niche. For this reason, Ripple has set its sights on interoperability. There are likely going to be different use cases and different coins that fit perfectly for a particular function and all of these technologies need to be able to talk to one another. In short, these currencies and ledgers need to have a proven use case and they need to play well with others.
3. The international transfer of funds is slow…but it doesn’t need to be.
Ripple’s core objective is to move money as efficiently as information moves over the Internet today; what we’ve coined as the Internet of Value. If you think of the Internet, you can send an email or search for information and the data will be delivered almost instantaneously. However, if you want to send currency (i.e. value), particularly across borders, it’s not nearly as simple, fast, or reliable. For instance, if you wanted to send $10,000 from the United States to the United Kingdom, the fastest way to currently do it would be to board a flight and manually transfer the money. Ripple is working to make sending money as instantaneous and simple as sending an email.
The technology to make this happen exists today, so why isn’t it a reality yet? Because innovation moves faster than infrastructure. It’s incredibly difficult for longstanding infrastructure within global organizations and networks to catch up to technology and commerce, which move at lightning speeds. Which leads us to the next point…
4. Today’s global businesses need a new solution yesterday.
While changing infrastructure is a long-haul game, there’s growing pressure and incentive to make faster payments a reality today. When international payment systems first came about in the 1970’s, it was mainly answering to big corporations who were moving large sums of money across borders relatively infrequently, so the transactions could afford to be slow. But today businesses are demanding the ability to send smaller value payments internationally with more frequency at a higher speed, and the existing system to send money across borders is becoming ineffective. Companies like Uber, Amazon, Facebook, and Airbnb, who pay thousands or even millions of people around the world, are driving the demand for a solution.
Think about the way commerce changed with the standardization of shipping containers: when the world moved from wooden crates to standardized metal containers, commerce exploded 700%. If you grease the wheels of commerce – and payments are one of the pain points of those gears – things happen much more quickly and you create growth as a result.
5. The future of digital asset liquidity.
Ripple believes that XRP will become the global institutional digital standard for international value transfer. Banks have already shown an appetite for running payments through Ripple’s technology because of the significant cost savings it can offer. But a key part of reaching this goal is further building the currency’s liquidity, which is supported by recent initiatives such as listing XRP on Bitstamp and other exchanges. But what comes next? Miguel predicts that in the not too distant future, banks will grow increasingly comfortable sourcing liquidity by directly connecting with these digital asset exchanges. He even sees a world where digital assets like XRP could be listed in more traditional capital markets like Bloomberg Tradebook, FXall and Reuters Direct.