The Executive Interview series, as part of Tech Investment Insights, provide you with exclusive interviews with newsmakers, industry leaders, and experts in the technology industry.
Interviews do not imply endorsement of the company, its products, or any associated securities. Rather, it is meant to provide you more information for your consideration from those currently directly in the industry itself.
I recently had the opportunity to interview Asheesh Birla, Senior Vice President of Product at the software company Ripple. Ripple is a fintech-focused technology company which has become prominent in recent years for its Ripple payment protocol and network as well as the XRP (XRP-USD) cryptocurrency. Birla joined Ripple in 2013 and is an entrepreneur, former VP of Global Technology at Thomson Reuters, content management company founder, and startup advisor.
Ripple was founded in 2012 as OpenCoin and in 2015 was rebranded as Ripple Labs, Inc. The company's primary product to date has been the Ripple payment network and protocol which operates as a remittance, settlement, and currency exchange system. The system currently utilizes a cryptocurrency called XRP which, although Ripple owns a large and influential market share of it, the company states is independent of its control as decentralized and open-source.
The XRP cryptocurrency has consistently held its position as the third largest cryptocurrency by market capitalization for several years. In early January 2018, the XRP cryptocurrency reached a market capitalization of about $147 billion. As of October 21, 2019, XRP had a market capitalization of about $12.71 billion. As a particularly large and active altcoin XRP has been a focus of much public discussion and institutional activity. It has also seen significant controversy on various fronts and potential market competition for its core payments network as well.
ER: What is Ripple? Why was it created and what issues does Ripple address?
AB: Ripple enables the world to move money like information moves today via our technology which allows financial institutions to process payments instantly, reliably, cost effectively and with end-to-end visibility anywhere in the world.
Our strategy from the beginning has been to improve the existing financial system rather than fight against it — working with regulators, governments, and central banks to change the system from within. As a result, we’re the only blockchain company with customers using its products commercially. Today, over 200 banks, payment providers and other financial institutions use our payment network, RippleNet, in 40+ countries to communicate information about a payment in real-time for instant settlement - without failure.
Ripple was created to address inefficiencies in the world’s global payments systems: Today, the fastest way to transfer money is to bring physical cash on a plane with you. It's crazy that we can stream video from a space station but can't send money in real time, globally. These inefficiencies disproportionately affect those in underserved communities who lack the resources and access to financial services to complete fast, inexpensive and efficient money transfers.
Meanwhile, the demand for global remittances has increased. According to data collected by the World Bank, payment applications and services are growing more quickly than traditional banks – reaching an annual growth rate of 7% versus the 1% annual growth rate for banks. Despite increased attention to the space, remittance businesses still struggle to keep costs down with the World Bank citing fees as high as 7%. RippleNet is laying the foundation for these payments with On-Demand Liquidity (ODL) — a technological offering for financial institutions to instantly source liquidity as an increasing number of upstart payment service providers and fintechs look to prioritize digital remittance systems. ODL is actively replacing the slow, expensive and outdated payments infrastructure that exists today to address global demand for more efficient cross-border transactions.
ER: XRP has held onto its place as the third-largest cryptocurrency by market capitalization, behind the biggest names in Bitcoin and Ethereum, for quite a long time. What has allowed it to succeed as such and sustain as seemingly the strongest altcoin?
AB: XRP is a digital asset built specifically for payments designed to be quicker, less costly, and more scalable than any other payment infrastructure today. Other digital assets like bitcoin and Ethereum weren’t built for payments — they are designed to act more like a store of value or for executing smart contracts. For example, completing a bitcoin transaction can take up to 18 minutes, and the system only gets slower as it scales. XRP, on the other hand, can scale up to the same transaction volume as Visa (NYSE:V), which is why it was the best digital asset for Ripple to build its products around.
ER: What is the nature of the relation between Ripple the company and the XRP cryptocurrency? What other relevant assets, funds, and organizations support the Ripple network functioning and adoption? How is XRP governed?
AB: XRP is a digital asset built for payments. Ripple is a software company that exists independent of XRP. XRP is open-source and decentralized, meaning that Ripple can’t control who builds on the XRP Ledger, lists XRP or govern (reverse) XRP transactions.
In its ODL offering, Ripple uses XRP as a bridge currency between two fiat currencies so consumers can receive payouts in their local currency to source liquidity instantly for cross-border transactions. XRP has proven utility and liquidity around the world today, and it is not out to replace fiat currency.
As one of the few blockchain companies with traction for a non-speculative use case, Ripple is also uniquely positioned to support entrepreneurs in a meaningful way with Xpring - an initiative that invests in, incubates, acquires and provides grants to companies and projects leveraging XRP and the XRP Ledger to solve customer problems in a transformative way. Xpring has invested $500 million in blockchain companies to-date, including Bolt Labs , a privacy-focused payment channel network supporting multiple digital currencies; Securitize , which unlocks liquidity in the trillion dollar private securities market with compliant and easily tradable assets; Coil , a platform dedicated to reimagining web monetization for content creators; and Forte , which uses blockchain technology to upgrade the gaming industry and benefit players and developers alike.
In early October, Xpring launched its developer platform that allows any developer to utilize blockchain to move money and easily integrate payments within their applications. Since then, Xpring has welcomed several new participants to the XRP developer community — including Bitpay, BRD Wallet, Anchorage and Chainalysis — to further strengthen the XRP ecosystem.
ER: In July Ripple sent an open letter to the U.S. Congress calling for cryptocurrency regulation to be fair. What was the impetus behind this and how does Ripple see current regulatory trends moving both in the U.S. and worldwide?
AB: With the world’s attention on crypto and blockchain, our CEO Brad Garlinghouse and Executive Chairman + co-founder Chris Larsen wrote an open letter to Congress asking them not to paint all cryptos with a single broad brush, as doing so could hurt innovation in the U.S.
We’ve been supportive of thoughtful regulation from the beginning, working with regulated financial institutions, governments and regulators around the world. This letter was meant to serve as a reminder that many in the blockchain and digital currency industry are responsible actors, and digital currencies have the opportunity to complement existing currencies like the U.S. dollar - not replace them.
We’ve already seen instances of companies setting up shop outside the U.S. in countries that have more regulatory clarity (it’s certainly one reason why Facebook established Libra as an entity in Switzerland), so we’re urging regulators to support regulation that helps them to innovate responsibly. Our government relations team has been having a lot of productive conversations on this issue, and we’re happy to see government leaders are receptive to understanding the nuances of our industry.
ER: Ripple recently announced a partnership with MoneyGram for use in the global remittance market. What is the basis behind this and how does Ripple hope for it to benefit the cryptocurrency? What other kinds of adoption and usage has Ripple seen and hopes for its cryptocurrency?
AB: Ripple and MoneyGram (NASDAQ:MGI) share a vision to fix the challenges with cross-border payments -- increase speed, lower costs and offer transparency. As our global partner, MoneyGram will utilize RippleNet and leverage XRP in cross-border money transfers. Since MoneyGram is one of the world’s largest money transfer companies, RippleNet will have the opportunity to dramatically expand its network into several high friction payment destinations where remittances flows are high and pain points of cross-border payments are felt by end users and financial institutions alike.
Beyond our customer base, with support other entrepreneurs interested in building on top of the XRP Ledger to demonstrate the possibilities for its adoption. Xpring, which I mentioned earlier, is an initiative to support these entrepreneurs through funding as well as developing the tools and technology they need to more easily build this blockchain technology into their products.
AB: Ripple has been building a network business for the past seven years, and while there’s more attention and noise in this industry than ever before, we’re still the only one with 200+ production customers moving real money around the world with our products. I think a big differentiator for Ripple is that we’re not trying to circumvent the financial system, we’re working within it. It’s always been important to us to work with the regulated financial institutions so consumers stay protected.
We're not here to talk about what other companies are doing, but the announcement of Libra brought to light the number of huge tech and financial players leaning into crypto — which is a sign of industry maturity. The industry has come a long way since the days of Silk Road, and if we are to succeed, that requires all to work with regulatory compliance. Just as importantly, we don’t think that crypto will replace G20 fiat currencies.
ER: How do you see the cryptocurrency sector developing overall at the moment and what are the business, technological, and regulatory trends most worth watching at the moment?
AB: It’s no doubt that the industry has matured significantly since Ripple was founded. When the industry first emerged, crypto was synonymous with Silk Road — the online black market that relied on cryptocurrency to complete anonymous transactions —and people thought we were crazy to try to get banks onboard. Now in 2019, we’re seeing companies with real use cases, solving actual problems to help prove its value despite the noise.
That said, it’s still fairly early days for this industry and looking ahead, the most important thing that will shape the future of this space is regulation. Our general counsel has described the current regulatory landscape as a patchwork quilt — meaning it’s not clear which regulators are in charge of what, or how it all fits together. If we don’t get clarity soon, more blockchain companies could move their operations elsewhere and hurt business or the economy here.
Additionally, I think we’ll continue to see increased attention on the payments use case. When Ripple started, we were the only ones staying laser focused on solving the cross-border payments problem – perhaps because people saw how hard of a problem it is to solve – but with that big challenge is a big opportunity. The World Bank has reported record numbers of remittances, and we’re seeing payment service providers growing at a faster rate than traditional banks, which speaks to a shift happening in this space and a growing need for faster, cheaper payments powered by blockchain around the world.
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