U.S. Banks Could Be Exploring XRP for Cross-Border Payments Following Ripple's Legal Victory

In a landmark ruling, Judge Analisa Torres of the United States District Court for the Southern District of New York sided with Fintech company Ripple and decided that XRP was not necessarily a security. Ripple, the company behind the cryptocurrency, now expects U.S. banks and financial institutions to use XRP for cross-border payments.

In an interview with CNBC, Ripple’s Chief Legal Officer, Stuart Alderoty, said the company anticipates starting discussions with American financial institutions about adopting its On-Demand Liquidity (ODL) product. According to the San Francisco firm, XRP enables ODL to provide near-instantaneous money movement across borders.

The U.S. Securities and Exchange Commission (SEC) sued Ripple and its executives CEO Brad Garlinghouse and Executive Chair Chris Larsen, in December 2020, alleging the illegal sale of $1.3 billion worth of XRP. Contrary to several of the SEC’s allegations against Ripple, the New York judge recently ruled that XRP was not, in essence, a security.

Stuart Alderoty was optimistic about the ruling prompting American banks to return to Ripple and utilize its ODL product, further stating, “I think we’re hopeful that this decision would give financial institution customers or potential customers comfort to at least come in and start having the conversation about what problems they are experiencing in their business, real-world problems in terms of moving value across borders without incurring obscene fees.”

Ripple uses ODL, which utilizes XRP as an intermediary currency, enabling instant liquidity sourcing and real-time fund transfers. ODL is used by various businesses, including payment service providers, fintech companies involved in business-to-business transactions, and organizations seeking to transfer internal treasury payments to foreign accounts.

Ripple’s Customer Base

Interestingly while both Ripple and the SEC claim victory in the case, Judge Torres did make a split decision, granting that XRP itself was not a security. She also acknowledged that certain token sales qualified as securities transactions to institutional investors. The judge stated that approximately $728.9 million of such XRP sales did meet the criteria of securities, citing the ‘presence of a common enterprise and an expectation of profit’.

With Ripple’s core business operating outside the United States, most of its customers and revenue originate internationally. Although Ripple, which has approximately 900 employees globally, maintains a significant presence in the United States, Alderoty explained that since Ripple’s primary customer base is outside the United States, this aspect of the ruling would not immediately impact the company’s existing operations.

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