New World, New Rules


New technology, new rules, new world. Image: Shutterstock

One of the many complications of the successful implementation of fintech within our established financial system is governance. Apart from complying with regulatory requirements, banks using Ripple solutions need commercial rules that spell out their rights and obligations vis-a-vis each other in using the technology. These commercial rules allow banks to protect their own interests and coordinate their activities to the benefit of all banks using the technology.

Hand-in-hand with robust regulation, these commercial rules ensure the payment system is resilient to systemic risks and bad actors. New technology necessitates new rules, but it can also enable new monitoring and controls:

“As multilateral clearing organizations have strengthened and spread across many of the major asset classes traded in the markets, they have enabled coordinated action on governance, rules, technology, and risk management. It is possible that new technologies could substantially change the way these functions are pursued, but it would be surprising if they would obviate the need for multilateral clearing in the major markets. Governance, in particular, is a core function that is inescapably necessary if multilateral activity, even activity dealing with distributed ledgers, is to operate effectively.”

—Governor Lael Brainard, Board of the Federal Reserve, speaking at the Institute of International Finance Blockchain Roundtable, Washington, D.C.

At Ripple, commercial rules are a crucial part of our integrations with banks and financial institutions. As we work with banks around the world to connect with each other for cross-border transactions, part of that work is helping them craft rule sets that make sense in the context of a new technology, their implementation of that technology, and relevant local law. As Ripple technology grows in value and influence, we are helping banks lay the foundation in building a robust governance framework and process.

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In a report by the UK Government Chief Scientific Advisor on distributed ledger technology, the importance of rules like these is made crystal clear: “Effective governance and regulation are key to the successful implementation of distributed ledgers. Governance comprises the rules set by the owners and participants of the ledger that safeguard their private interests.”

Ripple has 30 active integrations and works with 10 of the world’s top 50 banks. These are not theoretical ‘somedays’ or sandbox exercises. We are the only company with enterprise-ready solutions in distributed ledger technology.

These integrations and the pipeline of production that will follow them would not be possible in the absence of these commercial rules, or if Ripple was somehow unaware of their necessity. We have the capability and resources to help banks develop clear and robust rule sets, and the banks that we work with agree.