A recent report from the World Bank, originally published in 2021, has resurfaced, highlighting Ripple’s XRP and Stellar’s XLM as ideal stablecoins for cross-border payments. The report emphasizes that these two cryptocurrencies have the potential to revolutionize cross-border fund transfers by facilitating fast and efficient transactions.
The report, which explores the emergence of Central Bank Digital Currencies (CBDCs) and their role in international payments, examines ongoing CBDC cross-border projects such as Inthanon-Lionrock and Project Aber. However, it also delves into the use of cryptocurrencies in cross-border payments, with XRP and XLM standing out as notable contenders in this field.
According to the World Bank, Ripple’s XRP and Stellar’s XLM enable faster and more efficient cross-border payments compared to traditional correspondent banking. The XRP Ledger, in particular, is highlighted for its ability to process transactions involving any currency, allowing users to transact in both crypto and fiat currencies through near-instant transactions with minimal fees. In contrast, the current global system takes over three days to settle cross-border transactions and imposes high costs, especially in regions like Sub-Saharan Africa where users incur fees of up to 8% of the transferred value.
The report also acknowledges that emerging Distributed Ledger Technology (DLT)-based payment protocols, such as those utilized by XRP and XLM, present competition to established clearing and settlement services provided by central banks and institutions.
Interestingly, the World Bank report refers to XRP as a cross-border stablecoin, which has sparked renewed interest in the cryptocurrency. Ripple’s announcement of its own stablecoin on the XRP Ledger further reinforces this designation. The upcoming stablecoin will fulfill the role of a payments stablecoin, aligning with the World Bank’s vision. Stablecoins, which maintain their value against an underlying currency, are crucial in facilitating cross-border transfers and payments due to their stability. The volatility associated with other crypto tokens has been a major deterrent for merchants.
In summary, the World Bank report from 2021 emphasizes the potential of Ripple’s XRP and Stellar’s XLM to transform cross-border payments through their fast and efficient transactions. These cryptocurrencies offer an alternative to the traditional correspondent banking system, with the XRP Ledger standing out for its ability to process transactions involving any currency. With Ripple’s upcoming stablecoin, XRP is set to play a different role in the cryptocurrency ecosystem, while still contributing to the growth of the XRP ecosystem. The report also recognizes the competition posed by DLT-based payment protocols to established clearing and settlement services.