Key Strengths of Distributed Ledger Tech from the Hong Kong Monetary Authority


The Hong Kong Monetary Authority joins the chorus of experts on DLT. Image: Shutterstock

In a recent white paper commissioned by the Hong Kong Monetary Authority (HKMA), distributed ledger technology got yet another affirmation that the financial world is ready to accept the unique benefits and engage with the unique challenges of blockchain-based solutions for cross-border payments and other use cases.

Echoing sentiments from the recent U.S. Federal Reserve report on the same subject, the HKMA report pointed out the key strengths of distributed ledger technology (DLT), highlighting the potential cost savings, complete traceability of records and transactions, and resiliency of the technology that could fundamentally change the banking and payments industries.

However, the HKMA report zeroed in on the specific transitional issue of interoperability, not just between different DLT networks, but between legacy technology and the new technology as it takes hold. The process will likely be gradual, meaning that a standard protocol that connects different types of ledgers (like the Interledger Protocol) will be needed. The report notes:

“The complex financial world, for example, already has a comprehensive set of multifaceted financial transactions systems, which work together to perform many different kinds of financial transactions. While some of these may gradually migrate to a DLT base, that process is likely to be gradual. This means there will be a mixture of legacy financial systems and newly emerging DLT systems working together at the same time, creating the need for an interfacing mechanism between legacy systems and DLT systems.”

In another similarity to the recent Fed report, the HKMA hones in on the need for governance and shared rule sets to ensure accuracy and trustworthiness in DLT systems. This question carries particular weight in Asia and the Pacific region, where each country has its own currency and clearing system, and cross-border payments are common.

While the question of how the legal framework currently underpinning our global financial system will govern this technology is a new and challenging topic for many companies in fintech, Ripple has been leading the charge in establishing governance and rules for integration of our infrastructure solution.  

Additionally, in 2016, Ripple created the Global Payments Steering Group (GPSG), the world’s only blockchain bankers’ network with defined rules and governance. 2017 will be a crucial year in policy and regulatory decisions that will determine how DLT is integrated into the world’s financial infrastructure. That work has already begun.

HKMA joins a growing chorus of global governments who recognize the present and future utility of a financial system that is immutable, works in real-time, facilitates interoperation between networks, and cuts costs at every level. Though there are steps we must take to bring the Internet of Value into being, forward-thinking leaders are paving the way.

Read the full white paper here.


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FlashFX Uses Ripple and XRP


Image: Shutterstock

FlashFX announces the launch of a brand new foreign exchange payments solution to improve foreign exchange in Australia. Built on Ripple and using its digital currency XRP for liquidity, FlashFX delivers transparency, near real-time settlement and transactional control to users, while cutting the cost of cross-border payments.

FlashFX is designed to revolutionize the traditionally complex and opaque process of these payments for everyone. It shares Ripple’s vision of the Internet of Value and the idea that making foreign remittances should be as simple as transmitting an email.

Nicolas Steiger, CEO of FlashFX, is looking forward to this future:

“We are excited to be part of the evolution in international payments processing. It’s about time that consumers and businesses saw a meaningful change in how money is sent across borders. The service provides an alternative for Australians who want to send a payment faster and cheaper than banks currently provide.”

FlashFX is the first Australian digital currency business to receive the Australian Financial Services License (AFSL) from the Australian Securities and Investments Commission (ASIC).

According to the Australian Transaction Reports and Analysis Centre (AUSTRAC), Australia processes $50 billion a year in cross-border payments. Competition and cooperation between banks and money service businesses (MSBs) has become more and more important as FX corridors have grown.

FlashFX is leveraging its proprietary infrastructure with other licensed money service businesses in relevant payment corridors. They are actively seeking to expand the ecosystem and facilitate other payment processors becoming Ripple-enabled.

Flash FX invites interested parties to engage directly with them.


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McKinsey: Corporates Need Faster Payments, Too



Transaction account balances are higher than ever. Image: Shutterstock

Correspondent banking is transforming, piece by piece. Banks are busy digitizing on the back end to compete with new challengers who have been working to unbundle banking services. So far, this has mainly affected consumer products, with challengers like Transferwise or m-Pesa offering simpler and more cost-effective payments services to individual customers.

However, corporate clients are equally aware of recent innovations in payment platforms, and expect the same level of upgrades to their own cross-border payments. Corporates are often faced with low-cost, real-time domestic payments that contrast with their experience of costly, days-long cross-border transactions.

Bottom line: corporates expect better cross-border payments services, and according to McKinsey, 70 percent are willing to consider alternative providers to get them. Banks must prepare to serve corporate payment needs on a whole new level.

So when it comes to cross-border payments revenue, exactly what is at stake?

McKinsey: corporates need faster #payments, too. Tweet This

Individual (C2C) remittances generate a healthy $405 billion in flows. This makes up less than half a percent of the world’s cross-border payment activity. Providers earn $25 billion in revenue around the world, accounting for 8 percent of total cross-border revenue. In comparison, business-to-business (B2B) payments offer $135 trillion in flows, bringing in $240 billion in revenue. The average transaction value is between $15,000 and $20,000, so that means corporate cross-border payments typically cost $30 to $40 per transaction. That’s a lot to pay for a payment that takes three days to settle and may not provide any certainty when funds are committed.

McKinsey reports that payments volume growth remains strong, and will likely only increase as the global marketplace becomes more digitally connected. However, this growth has an additional drawback for corporates who have a significant need for cross-border payments.

Similar to the dilemma faced by global financial institutions, corporates are increasingly looking for solutions to consolidate the liquidity tied up with the nostro account balances required to fund their overseas payments. Despite continued banking innovation, transactional account balances have never been higher. At the end of 2015, balances in transactional accounts exceeded $27 trillion, which McKinsey declares their highest level ever.

2016 was the year that banks began to accept distributed ledger technology for commercial solutions, particularly in cross-border payments. 2017 could be the year that financial institutions and corporates alike begin to adopt digital assets like XRP, which can allow banks to fund their payments in real-time, and in the process, cut down their dependency on nostro accounts.

McKinsey, as always, ends on an optimistic note citing adaptability as the greatest of all virtues:

“Established payments providers that act decisively can turn a changing landscape to their advantage, and the rewards for successful payments strategy and execution will be considerable.”

Freeing up $27 trillion is definitely a considerable reward.

Read the full McKinsey Global Payments 2016 report here.


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Fed Distributed Ledger Tech Report Singles Out Interledger



The Fed’s Faster Payments Task Force is responsible for improving the U.S. payment system. Photo: Tim Evanson

In the latest report from the Federal Reserve Board on “distributed ledger technology in payments, clearing, and settlement,” the future use of distributed financial technology looks more certain than ever. The exhaustive document details potential and known use cases, the path to adoption for new solutions and legal issues and governance among a whole host of subjects.

Three key takeaways from this report:

  • Distributed ledger technology (DLT) represents an opportunity to deal with existing frictions in payments, clearing, and settlement.
  • As DLT matures, compliance and governance requirements must evolve along with the technology to extend the existing framework.
  • An open interoperability standard like the Interledger Protocol (ILP) could spur further innovation and adoption of DLT-based systems for cross-border payments.

First, the report acknowledges that the system currently in place for cross-border payments is less than ideal. Taking the historical perspective, the Fed points out that the methods for executing, clearing, and settling financial transactions have evolved over many years, through iterations of different technologies and gaining complexity. The complexity contributes to friction between siloed systems, and adds additional costs. As a nascent technology, DLT shows promise to improve this system by addressing the inefficiencies and interoperating separate networks.

Next, the document brings a scrupulous attention to the complicated legalities involved in and governance arrangements that are critical for risk management in payments, clearing, and settlement systems. As Ripple’s Deputy General Counsel Jess Cheng noted in her article in the American Bar Association’s Business Law Today, where she explored the application of U.S. payments law to Ripple technology: “the benefits to having a consistent, unitary law governing all transfers made on traditional funds transfer system apply just as well in the context of distributed financial technology” as they do to traditional financial rails. As Vice Chair of the American Bar Association’s UCC Payments Subcommittee, Cheng has partnered with other experts to lead the discussion around cutting-edge legal issues for payments and emerging payment products.

While the question of how the legal framework currently underpinning our global financial system will govern this game-changing technology is a new and challenging topic for many companies in fintech, Ripple has been leading the charge in establishing governance and rules for how our infrastructure solution can integrate and possibly even improve compliance. Ripple has had a seat at the table in the most influential policy discussions, and are very proud to have our Head of Regulatory Relations Ryan Zagone elected to the Federal Reserve’s Faster Payments Task Force Steering Committee.

Additionally, in 2016, Ripple created the Global Payments Steering Group (GPSG), the world’s only blockchain bankers’ network with defined rules and governance. We predict that 2017 will be a crucial year in policy and regulatory decisions that will determine how distributed ledger tech is integrated into the world’s financial infrastructure. That work has already begun.

Finally, the report makes a specific point regarding the need for an industry standard to unify and interoperate parts of the existing structure with the next step in our fintech evolution: DLT. ILP was created with that exact goal in mind, and Ripple is very proud to see its potential  acknowledged by this report.

The section on cross-border payments specifically singles out ILP, explaining exactly how the protocol works and what it is intended to do:

“In addition, a particular industry development of note is the Interledger Protocol (ILP) which allows transactions to flow across different ledgers and creates connection points between two or more digital ledgers. In effect, the protocol defines a set of procedures for proposing a payments path and cryptographically escrowing funds across a series of interoperable ledgers and then subsequently executing the escrowed transactions once the recipient of the payment validates or acknowledges receipt of payment. The ILP is being developed as an open standard and is intended to improve interoperability and streamline the process for transferring digital assets by enabling entities in different countries with different payment systems to more easily transact with one another. Adoption of this or a similar protocol could spur further innovation and adoption of DLT-based systems for the cross-border payments use case.

Read the full report here.


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CME Group Executive Miguel Vias Joins Ripple



Ripple is proud to announce another addition to our team: Miguel Vias, head of XRP markets. In his new role, Vias will utilize his considerable expertise building liquidity for new financial products by working with market makers, traders, investors and exchanges to strengthen the XRP markets and set the stage for large-scale institutional adoption.

Global financial institutions are increasingly looking for solutions to consolidate the liquidity tied up with the nostro accounts required to fund their overseas payments. Digital assets allow for banks to fund their payments in real-time, and in the process, cut down their dependency on nostro accounts. A strong XRP reinforces these economics.

Vias joins us from CME Group, where he was global head of precious metals and metal options at the largest precious metals desk in the world. Prior to the CME, Miguel honed his craft at the commodities desks of Morgan Stanley, Bank of America, and Mitsui. He brings nearly two decades of trading experience to our team.

We talked with Vias about what brought him to Ripple, and what he’s most excited to do in his new position.

What made you decide to get into fintech, or come to Ripple specifically? This is a little bit of a career change for you, so can we talk about what interests you about this position?

My interest in fintech goes back to early 2012. While I was working in London, I’d begun to hear about bitcoin. A borderless currency without a central counterparty was theoretically appealing, but I had my doubts, especially given the complex systems bitcoin on its own was attempting to replace.

Still, the blockchain and distributed financial technology could clearly solve some interesting problems. Two years after joining CME, I came across Ripple and XRP, and immediately knew I’d found something. Ripple and XRP removed most of the initial reservations I had around bitcoin, namely that there was an actual group of people focused solely on integrating into the financial system, instead of displacing it.

Since I bought my first XRP two years ago, I’ve kept a close eye on everything Ripple- and XRP-related and have been impressed with the progress the company has made. From building the team, to the product, to the market infrastructure, it’s obviously the best blockchain-focused fintech startup in the world. So when I had the opportunity to become part of the team, there was no way I was going to pass it up.

How does your experience in commodities translate to working with XRP?

XRP is uniquely qualified as a liquidity solution, to help banks and corporates currently holding balances in nostro accounts all over the world to facilitate payments without trapping their cash. As a digital asset, it can reduce the amount of capital in float. As a bridge currency, it can enable liquidity concentration around fewer currency pairs, making cross-border payments more efficient.

Looking at it through the lens of my experience, XRP’s commodity and foreign exchange characteristics (specifically its limited supply) makes it very similar to precious metals. The considerations around inventory and delivery that make trading a digital asset like XRP unique are also at the core of the commodities markets. As a result, my understanding of precious metals, especially when it comes to market structure, will be ever more helpful as we increase the access to, and liquidity of, XRP.

Additionally, my experience in OTC markets and at an exchange will aid in charting a path toward wholesale XRP adoption. Similar to other digital assets, XRP exists in an interesting hybrid of OTC and exchange-traded markets. If we want to transform XRP into an institutionally viable currency, it’s crucial to understand how both those markets function individually, how they complement each other, and how we can leverage a deep understanding of both to further develop XRP.


What about your new role is most exciting to you? What do you think the future of digital currency will look like?

As I mentioned, I think the natural ethos of digital currencies actually limits their utility and thus general adoption. In order for any currency, digital or not, to achieve critical institutional adoption requires a team of people to manage its progress. As a thought experiment it might be comforting to think that open source adoption is possible, but the reality is much more complicated.

That’s a lengthy prelude to what I find most exciting about the role, which is being primarily responsible for ensuring XRP achieves institutional adoption. The idea that I will be part of the team which will help grow the first institutionally useful digital currency is amazing. As for the future of digital currencies or distributed ledgers generally, I think we will continue to see usage increase in more institutional areas.

The role XRP plays in reducing the capital needed to fund cross-border payment businesses is equally applicable to any cross-system or cross-asset transaction. Beyond the foundational use case of payments, digital assets will lower collateral requirements across the whole of the capital markets, for example, with securities settlement, derivatives markets, and repo lending.

A digital asset may well be included in baskets of world reserve currencies in the years to come. It will take some time, and a ton of effort, but I have no doubt in the very near future we will live in a world where much of our existence will revolve around digital currencies and distributed ledger technologies.

With regards to XRP, what can we look forward to in the future?

We’re planning to launch a quarterly XRP update that will focus on the state of the market, XRP deal structures and sales targets. Most importantly, our intent is to make XRP more broadly accessible by listing it on additional exchanges. So, stay tuned! I can’t wait to get started.

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Santander and Reisebank Both Recognized for Innovation



Image courtesy of Santander

Ripple often references our banking clients as “leading” in the world of financial services, and “innovative” for their commitment to providing better services to their corporate and individual clients through the use of distributed financial technology like ours.

However, this is more than a matter of opinion. The banking world has its own methods of rewarding and singling out the financial institutions that are pioneers in their field; the ones that investigate, test, and adopt the technologies that are poised to remake the industry. Innovation is not always on a bank’s radar, and history rarely rewards those that wait and see from a vantage point of comfort and security.

With that in mind, we are pleased to share news that two of Ripple’s clients have been recognized for their bold and innovative work in bringing banking in line with customer expectations in an era of on-demand services.

  • Santander received the Payments and Wallets award in the category of Distribution and Marketing in Retail Financial Services from the nonprofit financial marketing association Efma, specifically for its Ripple-powered International Payments app, which uses blockchain technology to enable customers to make faster and cheaper international payments.
  • Reisebank won the Banking Innovation Award for their implementation of a fast and inexpensive form of international transfers, for all currencies around the world by means of open and decentralized blockchain technology. Ripple’s solution provided this technology, allowing for cross-border payments that settle in real time.

Ripple is very pleased to have contributed to these wins, as well as to the ongoing creation of the Internet of Value. Huge congratulations to Santander and Reisebank!

To read more about Ripple’s work with these award-winning banks, read our case studies on both  Santander and Reisebank.


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KPMG: Future Bright for Next-Generation Payment Solutions



In payments, the future looks bright. Image: Shutterstock

Professional services giant KPMG and venture capitalist database CB Insights published a report called “The Pulse of Fintech,” looking back over the biggest moments in Q3 of 2016. Most of the report focuses on trends and highlights in fintech funding during this action-packed quarter. However, the report also makes some forward-thinking points on the fintech use case in cross-border payments, pointing out that Ripple is poised to “revolutionize” this space that is clearly so ripe for reinvention.

KPMG: the future of cross-border #payments is bright. Tweet This

Citing a trend in funding specifically for corporate and B2B cross-border payments, the report acknowledges that the current processes for these payments are fraught with friction and subject to manual intervention across the value chain. KPMG asserts that open API systems and an ever-increasing demand for data-rich digital payments are driving interest in this arena.

Ripple Insights has previously discussed the specific needs of the new corporate; companies like Uber, Facebook, and Amazon who engage with a bilateral marketplace and must accept and disburse high-volume, low-value payments at an unthinkable rate. Chinese e-commerce juggernaut Alibaba reported a single day’s sales at $17.8 billion in gross merchandise volume, at 175,000 transactions per second. Corporates with volume like this will ultimately drive market adoption of payments solutions that can keep up.

Similarly, cross-border payments are called out in the report as costly, inefficient and lacking in the transparency demanded by both individual consumers and vigilant regulators. Ripple’s distributer ledger based solution is mentioned as one of the fintech contenders aimed at this pervasive problem, with the potential to “revolutionize this space.” Ultimately, however, a myriad of fintech solutions will only compound the problem of competing, siloed networks. KPMG points out the importance of developing a standard for interoperability, like Interledger, and the coming changes compelled by PSD2 (the European Union’s Payments Services Directive).

“In Europe, PSD2 promises a significant impact and a number of major benefits for fintech companies, merchants and consumers alike, and opens up the payments area to new competitors who can use aggregated data to create ancillary payment services. In contrast, US regulatory bodies are attempting to balance the needs of fostering competition and promoting standards but the tendency is to let the market forces play out. That said, there has been a recent push to modernize the payment system in the US, which includes the development of a Real-Time Payment system that leverages the ISO 20022 global message standard.”

As each of these messaging and payment systems evolves, the struggle for a future-proof network only becomes more important. A standard and a focus on interoperability are not luxuries; like cross-border payments that serve corporates and individuals well, they are a necessity.

Read the full report here.


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Ripple Announces An Upgrade to RippleCharts


Today, Ripple unveiled a new and improved RippleCharts, with a more holistic representation of total trading volume.

The most important enhancement is the inclusion of new markets such as Poloniex, Kraken, and BTC38. RippleCharts will continue to expand and evolve as XRP is listed on more exchanges.


So, what’s new?

Both the visualization and the functionality of RippleCharts are improved. The new visualization shows the trade volume of XRP both on the Ripple Consensus Ledger and off-ledger, via markets on third-party exchanges.  The data that users can view represents all volume during the rolling hour, day, three-day, seven-day, or 30-day window.  Users can view value in different currencies by selecting from the dropdown menu for an expanded view.  The displayed figures indicate the cumulative value of XRP traded, with each exchange represented individually below.  The relative size of the circle represents the percentage of total volume that occurs on each exchange, and each segment of the circle represents the volume of one particular currency pair.

We view RippleCharts as an open tool for the XRP community. We hope that its utility will continue to serve an important role in price discovery and displaying network health for the growing XRP market. Ripple is continuously committed to making XRP the most useful native digital asset for supporting liquidity between any two currencies in the world.

Visit the new RippleCharts here.


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BNY Mellon: Reinventing Payments | Ripple



BNY Mellon is focused on reinventing payments. So is Ripple. Image: Alekjds

In a recent report titled, “Reinventing Payments in an Era of Modernization,” worldwide banking and financial services corporation BNY Mellon evinces a cautious optimism about distributed ledger technology. The report points out the challenges in the current payments infrastructure: risk, end-to-end cost, timeliness, customer experience, transparency, and managing information every step of the way.

BNY Mellon advises collaboration as we reinvent #payments. Tweet This

With customer expectations driving a need for a fully digital, cost-effective, and real-time customer experience, BNY Mellon gives very familiar advice: banks, customers, and fintechs alike will be best served by collaboration. Banks can offer legacy advantages of established trust and relationships. Solutions providers can offer banks the ability to compete for customers and cut internal costs. The report suggests that “if we work together as an industry, it is very possible that we can deliver that global payment experience within the next 10 years. But we have a lot of work to do before then!”

Ultimately, BNY Mellon sees the success of distributed ledger technology being predicated on three basic criteria: network effect, regulatory engagements and standards. Network effect, naturally, requires a greater percentage of participation than any of the up-and-coming networks has now. These consortia and governance groups grow, but none yet boasts a truly global reach to rival that of competitors like Visa.

Similarly, regulatory engagement will require the creation of rules and guidance to govern market participants as the technology evolves to serve the market. On the subject of standards, BNY Mellon points out that Ripple has made a major stride in providing a standard to enable payments across payment networks: Interledger.

“While various organizations and consortiums are working on blockchain standards (e.g., R3, Hyperledger as previously described) there is yet no true blockchain standard, which also impedes progress. Ripple’s Interledger Protocol aims to solve this challenge by enabling diverse ledgers to seamlessly interact with each other.”

The final word in this report is unequivocal: customer experience will be the deciding factor in whether banks stay in the payments business at all. As regulations shift to open up the market, banks will have to do something they have not done in a long time: compete.

Fintech can help.

Read the full report here.


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