Ripple, the parent company behind leading cryptocurrency XRP, is putting its money where its mouth is. Earlier this week, the company disclosed that it has spent half a billion dollars to broaden use cases of its technology.
Ripple’s $500 Million Initiative
It has been a year since Ripple launched the Xpring ecosystem initiative to build the “Internet of Value.” By working with developers and startups, Xpring was designed to build cryptocurrency infrastructure and broaden use cases of the XRP Ledger.
Over that stretch, the San Francisco-based Ripple has doled out $500 million in support of over 20 companies. The largest single investment, valued at $100 million, was made in Forte, a blockchain gambling company.
Ripple has also invested in privacy-focused payment networks, liquidity providers, and peer-to-peer lenders.
Through Xpring, Ripple is looking to not only spread blockchain adoption, but popularize its XRP cryptocurrency. So far, the two goals have been at odds: Ripple has done a fantastic job of partnering with some of the world’s largest banks to use its blockchain infrastructure, but they’ve been less keen to adopt XRP.
Is XRP a Security?
There are several reasons why XRP adoption is lacking, but one of the main ones is the cryptocurrency’s regulatory status.
Ripple the company has been adamant in claiming that XRP is not a security, and has given some convincing reasons why that’s the case. But regulators aren’t so sure.
Last year, the U.S. Securities and Exchange Commission (SEC) conceded that Bitcoin and Ethereum, the two largest cryptocurrencies by market capitalization, are sufficiently decentralized to not be considered securities. But the same standard doesn’t apply to XRP, which is ranked third in market value. At last check, 60% of all XRP in circulation were held at Ripple’s corporate headquarters.
CEO Brad Garlinghouse says Ripple’s ownership of XRP has no bearing on its security status and that the company does not control XRP, but uses it to conduct cross-border payments.
The regulatory debate intensified last year after Ripple was forced to defend itself against several class action lawsuits claiming that the company was selling unregistered securities. If XRP was ever deemed a security, Ripple would be forced to reimburse investors.
The chances of that happening appear to be getting slimmer now that the SEC is bending for innovation’s sake. William Hinman, director of the SEC’s division for corporate finance, says the regulator may issue No-Action Letters for crypto projects that are now compliant with federal laws — even if this wasn’t the case during the original token sale. Suffice it to say, that’s very good news for Ripple.
Although Ripple may have dodged regulatory scrutiny, the big question mark is whether it can convince banks and other financial institutions to use XRP. Ripple has signed on hundreds of financial institutions to test-drive its blockchain infrastructure, but adoption of XRP has been lagging. According to Ripple’s CTO David Schwartz, the adoption lag will likely continue for the foreseeable future until blockchain technology is improved. It remains to be seen how this will impact XRP’s price.
Disclaimer: Author holds XRP at the time of writing.