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- Wednesday, June 22nd, 2022 at 19:29 #316511HappyGreetingsParticipant
Yesterday BIS released [chapter 3 from their Annual Economic Report 2022](https://www.bis.org/publ/arpdf/ar2022e3.htm); the full report will be released on the 26th of June 2022. The 41 page document leads with these takeaways:
* A burst of creative innovation is under way in money and payments, opening up vistas of a future digital monetary system that adapts continuously to serve the public interest.
* Structural flaws make the crypto universe unsuitable as the basis for a monetary system: it lacks a stable nominal anchor, while limits to its scalability result in fragmentation. Contrary to the decentralisation narrative, crypto often relies on unregulated intermediaries that pose financial risks.
* A system grounded in central bank money offers a sounder basis for innovation, ensuring that services are stable and interoperable, domestically and across borders. Such a system can sustain a virtuous circle of trust and adaptability through network effects.
* New capabilities such as programmability, composability and tokenisation are not the preserve of crypto, but can instead be built on top of central bank digital currencies (CBDCs), fast payment systems and associated data architectures.
The document should be of interest to anyone interested in what the financial world is actually working towards. Neither Ripple, nor XRP, have been mentioned in these reports in a major way the last couple of years. To me this is concering, or is at least not compatible with a belief that Ripples XRPL or its other solutions are involved in these larger projects, which they should be if this was indeed the best solution to many of these problems. The fact that we only have projects with really tiny nations is telling, let’s not kid ourselves. Both this report and leading organisations are doing major work in these areas – but it is not cryptocurrency that interests them – it is the technology of DLT, smart contracts, and CBDCs, that is of interest – tellingly explained in above point two. The most referred to projects seem to be R3s Corda in the BIS Innovation Hub’s Nexus project (highly recommend the [report](https://www.bis.org/publ/othp39.htm)\- just don’t expect to find a lot of things pointing to Ripple explicitly, as there are none), and SWIFT’s GPI, which seemingly leave some things unresolved. It should be noted that most central banks in their reports on these matters continually stress the importance of the private sector to fill many roles – among them cross border transfers, or many other roles aimed towards retail. This is where this last report gets interesting.
The chapter 3 part of the report now public, does hold a lot of good stuff. It speaks tons about the roles of retail PSPs (Payment Service Providers), and the different roles they would have – see especially the section called Vision for the future monetary system (p. 90-103). It does seem to me that Ripple is well suited to be able to fill this role – and can in fact already do so in many regards, even without the actualy CBDCs that is otherwise thought of as a necessary part.
It is also the case, that even though actual retail CBDCs are a couple of years away in the future, smaller more regional approaches are starting to create a space in which I can easily see Ripple and XRPL neatly fit into. [The second P27 white paper, released 8th of June 2022,](https://nordicpayments.eu/the-p27-white-paper-2022-the-payments-enabler-for-the-nordics/)talks volumes about the Nordic market and the inititives of the leading banks in Sweden, Denmark, Norway, and Finland, are pushing towards. Parts of these innovations, which at least according to the reports are fairly imminent, also leave room for private inititives such as Ripple, to play a major role in delivering products to retail consumers. Indeed, Sweden and the Nordic countries already have come in this – we send money by phone in seconds, and not paying with our phones everywhere feels antiquated and even paying with cards is done seldomly among forum category 40-year olds. In summation there seems to still be a small window in which to act or start operating, before the central banks release their own CBDCs, which judging by all government and banking-organisations project reports and white papers will not use Ripple or at least have not involved them in their larger projects (just go see for yourselves – I also “know” that many of us believe Ripple is already involved in them, which simply is not true – just read their reports).
The opportunity certainly is still here and is in many regards up for grabs; that CBDCs will not be released with Ripple as their main operator is not a threat in this. Ripple can however still be one of the first companies to take advantage on the soon to be realised new financial system, and there are parts to be filled for sure. Ripples solution is in many regards elegant, and should generally work quite well assuming they can establish themselves in especially the Nordic countries so to be able to trade their currencies with a sufficiently high liquidity – when we can see this start to happen, we will certainly have a good position in still hodling XRP.
How concerned are you that Ripple seems to be left out from the worlds main stages? Does it matter? Is the niche that Ripple aims to take part of open enough for them, even with them being left out for the last couple of years? Thoughts?
tl;drCentral banks and other organisations are not working directly with Ripple – but the vision they do have for the future monetary system does create a space which Ripple and XRP seems to be very well suited to fill. And much of this innovation is happening outside the US, which is good.
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