R3 Consortium Banks Explore Ripple For Cross-Border Transactions
Ripple CEO Chris Larsen explained a major milestone for the company in a recent tweet. The company has teamed up with the R3 blockchain consortium and a dozen banks to trial cross-border transactions using the XRP currency. Using Ripple’s native digital asset should help with scaling liquidity, as well as address the inefficiencies of cross-border payments.
Although the R3 consortium has developed their own blockchain solution, called Corda, they are keeping an open mind towards collaborating with other service providers. Ripple is a well-known name among financial service and blockchain leaders. Moreover, they recently attended the annual Sibos conference, where they shared some interesting remarks regarding Swift’s new project.
A partnership between R3 and Ripple will put a new spin on using blockchain technology in financial services. With a dozen different banks on board, including Barclays, Nordea, and Santander, among others, this new trial project gains support from day one. Additionally, it is interesting to note the native XRP currency will be used for these cross-border transactions, in an effort to reduce costs.
Nordea Sr. Business Developer Roman Dahl is optimistic:
“By developing blockchain with native digital assets specifically dedicated to cross-border transactions, Ripple has a great potential to revolutionize traditional global payment concepts, enabling international payments in real time, at lower costs, digitally/cryptographically secure, significantly contributing towards digitalization of the financial industry and our world!”
In the current financial ecosystem, banks are forced to rely on nostro accounts. Such an account is used to hold different fiat currencies used for foreign exchange purposes when cross-border transactions take place. Using these accounts is cumbersome, and causes unnecessary delays when it comes to completing the transfer of value itself.
Using an independent digital asset will address these concerns, and provide real-time exchanges of value at the same time. More importantly, the Ripple team is confident their blockchain solution will enable on-demand liquidity, which allows for these instantaneous exchanges of value around the world.
R3 CEO David Rutter commented on this partnership as follows:
“The tradition of holding numerous currencies across multiple accounts in different countries is costly and inefficient. This is a legacy issue from a time when the technology did not exist to offer a viable alternative; however, digital assets and distributed ledgers can now enable real-time exchange of currencies between parties anywhere in the world without the need for a third-party intermediary. This prototype paves the way for a major overhaul of how banks process and settle cross-border payments.”
Unlike bank-issued assets, independent digital assets have a global reach. Moreover, to establish Ripple as a new, digital asset class, Crypto Facilities in partnership with CME Group, will be the first derivatives exchange to list XRP futures. “Banks, liquidity providers, and traders are holding XRP in significant size and will be able to use the new marketplace to manage and trade XRP price risk,” stated Dr. Timo Schlaefer, CEO of Crypto Facilities.
Ripple currently holds the fastest settlement time, according to the official blog post, as it takes five seconds to complete transactions. While using XRP will help reduce the need for nostro accounts, it will also allow banks to save as much as 60 percent in processing costs. That money can then be used to explore new market opportunities.