The up-and-down story of Ripple (CCC:XRP-USD) is on an upswing. Some cryptocurrency watchers say this could be the breakout that will push XRP to an all-time high of $3.40. And while it will take a while for the cryptocurrency to surpass that high, the odds may have gotten a lot better.
Ripple remains an intriguing cryptocurrency. The primary reason for the intrigue is that it’s one of the only cryptos that has a strong use case. When I first wrote about Ripple in January, I said I found the company more intriguing than the coin. I still think that may be the case.
However in the case of Ripple, this long-term strength has been a short-term weakness. The company is involved in litigation that will decide if XRP is subject to regulation.
What Is XRP?
XRP is the digital coin used by Ripple Laboratories as the medium to facilitate cross-currency transactions. Currently those transactions take an inordinate amount of time and can be very expensive. By using XRP, Ripple changes that.
Before I go any further, it’s helpful to reestablish what makes Ripple different. There is a company (Ripple Labs) and a coin (XRP). The two however are used synonymously as Ripple. Here’s the difference.
Ripple Labs is a private company that operates as a payment processor for international transactions. Its primary competitor is SWIFT. And that’s not insignificant. SWIFT is currently the world’s largest international payment network. Approximately 11,000 financial institutions regard SWIFT as its preferred choice.
XRP is the coin that Ripple uses to facilitate its transactions. For example a customer would convert their native currency into XRP prior to making a transfer. The recipient in the other country would receive the deposit in XRP and then convert it into that country’s native currency.
It’s fair to note that Ripple has a stable of companies that already use XRP. And the company is making a push to have XRP be used to link different central bank digital currencies (CBDCs).
A Security And a Currency
This is where the story gets a little bit complicated. As I wrote back in January:
“Ripple goes to great lengths to refer to XRP as an ‘independent digital asset.’ Although the company uses the digital coin on its platform, Ripple insists it does not have control over the technology.”
Specifically, Ripple owns a finite amount of XRP which is what allows the company to make smooth, speedy transactions internationally.
The U.S. Securities & Exchange Commission (SEC) however cried foul. They claim that Ripple Labs is a security, not a currency. That would mean XRP would be subject to regulation.
However, as Brenden Rearick wrote, the judge hearing the case made a statement that suggests XRP has value as a currency and has a utility that makes it different from a cryptocurrency such as Bitcoin (CCC:BTC-USD).
You don’t have to parse that statement too much to know that it suggests Ripple will come out favorably in the lawsuit. After all, the judge has made Ripple’s case for it: It is, in fact, both a currency and a security.
Ripple May Become Easier to Buy
That’s not to say it’s particularly difficult. It’s just not as straightforward as some other cryptocurrencies. It can only be purchased in U.S. dollars on a handful of exchanges. But it is available on many other crypto exchanges, although you first have to buy another cryptocurrency and then exchange it for XRP.
Like I said, for an experienced crypto trader, this is not a big deal. Even for a novice, it’s not an obstacle; but it could be an unnecessary speed bump.
But that could be changing. Many exchanges were shying away from listing XRP directly out of concern that the SEC would win its lawsuit against Ripple. With that outlook looking more positive for Ripple, it may become much easier to purchase XRP.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.