A recent report from the World Bank, published in 2021, has resurfaced, highlighting the potential of Ripple’s XRP and Stellar’s XLM as stablecoins for cross-border payments. According to the report, these two cryptocurrencies have the ability to revolutionize cross-border fund transfers through fast and efficient transactions.
The report, which explored the rise of central bank digital currencies (CBDCs) and their role in international payments, examined various ongoing CBDC cross-border projects, such as Inthanon-Lionrock between Hong Kong and Thailand, and Project Aber between the UAE and Saudi Arabia.
In addition to CBDCs, the report also examined the role of cryptocurrencies in cross-border payments and specifically identified XRP and XLM as significant players in this sector. The report stated that both Ripple and Stellar enable faster and more efficient cross-border payments compared to traditional correspondent banking.
The World Bank highlighted the XRP Ledger’s 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 existing global system takes over three days to settle cross-border transactions and imposes high costs, with some regions charging users up to 8% in fees, as revealed by a separate World Bank report.
Furthermore, the report recognized that emerging distributed ledger technology (DLT)-based payment protocols pose a competition to established clearing and settlement services provided by central banks and institutions.
Notably, the report described XRP as a cross-border stablecoin, which garnered attention as Ripple recently announced its plans to launch its own stablecoin on the XRP Ledger. This move by Ripple is a response to user demands for a stablecoin. Ripple’s CEO, Brad Garlinghouse, stated in an interview with CNBC that liquidity pools native to the XRP Ledger would complement and contribute to the growth of the XRP ecosystem.
With the introduction of the new stablecoin, XRP is unlikely to be used as a payments stablecoin as envisioned by the World Bank. Instead, the upcoming stablecoin will fulfill this role, as stablecoins maintain their value against the underlying currency, which is crucial for cross-border transfers and payments. The volatility of crypto tokens has deterred many merchants from adopting them.
Overall, the World Bank report underscores the potential of Ripple’s XRP and Stellar’s XLM in transforming cross-border payments, offering faster, more efficient, and cost-effective alternatives to traditional correspondent banking.