Ripple loans may open the door for XRP adoption, liquidity
Ripple has been working to establish its presence worldwide and according to a recent job listing, it looks like the real-time gross settlement company is dipping its feet in the lending pool. According to the job description, the service will be availed by its RippleNet customers.
Even though Ripple has not yet elaborated on the project, there have long been speculations of Ripple considering the use of XRP for loans. If Ripple does use XRP for lending purposes, it might be the biggest use-case for the world’s third-largest digital asset. The use of XRP on a cross-border basis to provide lending capital will have its own set of legal and regulatory hurdles, but the company might be able to wriggle its wave through it. This potential use case of XRP could be used to create market asymmetry.
According to Arturo Portilla, Tax and Fintech lawyer, XRP’s use is only in remittance, creating a flow of asymmetry between the remittance-receiving and sending countries. He added,
“As a consequence thereof, products such as ODL may cause a market assymetry between any two corridors, i.e. USD and MXN. While ODL increases XRP buying pressure in the U.S., it increases XRP selling pressure in Mexico.”
However, the lack of demand for XRP in countries like Mexico has created a need for arbitrageurs, a need that would compel institutional traders to buy XRP in the country. This would allow users in Mexico to send back XRP in the U.S to meet the remittances demand, while also creating buying pressure in the U.S, thus creating liquidity in the ODL corridors.
However, in order to create a flow of funds from remittance-receiving countries to the one sending, one may need to lend capital. This capital will be lent to the receiving country, who will make recurrent repayments to the lending country with additional agreed-upon interest. The Lawyer added,
“If such loan repayments + interest are made through XRP (or ODL for this matter), you are essentially increasing the demand for XRP in the remittance receiving country, as borrowers are required to buy XRP in order to send the payment to the lender.”
This will cut out reliance on opportunists in the market and will increase the liquidity of XRP in remittance-receiving countries. This could be a reality soon as Ripple has left no stone unturned in expanding its ODL corridors and adding members to RippleNet. Recently, a UAE bank, RAKBank, expanded its remittance routes to Bangladesh using Ripple’s blockchain technology.
Further, RippleNet member Kuwait Finance House [KFH] has also been working on expanding its services to Turkey, using Ripple. With an increasing list of members, Ripple’s loan services will be an important product to look forward to.