SAN FRANCISCO – You may have seen the actor and technology investor part-time Ashton Kutcher present $ 4 million digital coins called XRP to Ellen DeGeneres' favorite charity on her talk show. Or maybe you saw Stephen Colbert announce a $ 29 million XRP donation to school teachers during his late night show.
Ripple, a San Francisco company that is rolling in cash thanks to last year's rise in the value of cryptocurrencies, was behind the gifts. And it has quietly become one of the most valuable start-ups of the last decade thanks to the value of XRP, the digital token created by its founders six years ago.
Now comes the hard part: persuading people to use XRP for something other than speculative trading. It is a problem that afflicts most of the cryptocurrency industry still young. Digital tokens like Bitcoin and its many imitators (like XRP) have been designed to make electronic transactions of all kinds easier. But today almost no transaction is happening, except on exchanges of virtual currencies where people bet on their price.
Despite a dramatic decline in the value of this year's cryptocurrencies, Ripple still owns $ 30 billion of XRP, and the company wants to get some of those digital tokens in the hands of potential users.
In addition to the on-air gifts and a private concert by rapper Snoop Dogg for currency fans, Ripple has created a A $ 300 million fund that will pay companies the use of XRP for their intended purpose, facilitating the transfer of money across international borders. Ripple recently announced another program, called Xpring, which will pay developers to create software focused on XRP.
"It's still very, very early, but we're seeing the vision come to life," said Asheesh Birla, the head of Ripple's product. "I have to make sure it's in the hands of the right people."
But few cryptocurrency projects have evolved to the point where someone uses tokens as something other than an investment.
An investor in the sector, Spencer Bogart, coined a term for these activities: Recessed commercial light.
Many people who bought digital tokens created by these projects did so in the belief that one day they will be useful for real transactions of some kind. If projects want to prevent these investors from selling, projects must convince them that tokens will have a long-term value.
A company known as Block.One, for example, raised $ 4 billion from investors before it even had a working software. It is now using some of the billions it has generated to create investment funds that will encourage developers to work to make cryptocurrency useful, EOS.
But no project is sitting on more money than Ripple, due to the unusual structure of the XRP cryptocurrency.
Bitcoin and most other well-known cryptocurrencies are slowly being created over time and distributed to computers on the network, with no company or authority in charge. In contrast, most XRP tokens – about 60 percent – are held by Ripple.
In January, the value of an XRP token rose slightly above $ 3, making it a co-founder of the company, Chris Larsen, richer than Facebook Mark Zuckerberg for a short time, and Ripple worth more than most banks of the world.
Since then, the value of an XRP has dropped about 80 percent. But investors kept the price at around 50 cents and the value of XRP's holdings at around $ 30 billion – in addition to the WeWork or SpaceX rating.
The company's business model has attracted famous investors, including Kutcher's venture capital firm, Sound Ventures, which helps explain its appearance in "The Ellen DeGeneres Show" in May.
But Ripple's huge holdings involve significant risks. The main legal concern that afflicts many cryptocurrency projects is that US regulatory bodies classify their tokens as investment or securities contracts.
If projects such as XRP and EOS get the security label, they will be subject to restrictions on trade and movement, making it even less likely that people will use tokens for their intended purpose.
A senior official with the Securities and Exchange Commission he said in a speech this month that one of the major factors in determining if a token is a security is the role that a central organizer plays in promoting money and increasing its value, especially if the central organizer holds a significant amount of money. tokens.
Ripple executives said they were confident that XRP is not a security because XRP could still be used even if the company disappeared. The company hired Mary Jo White, who was the president of the S.E.C. from 2013 to 2017, to defend it from lawsuits brought by disgruntled XRP investors who claim that the company has deceived them.
But the situation is something of a Catch-22 for Ripple: its efforts to promote XRP could prove how reliable XRP is on Ripple.
"The centralized control of a cryptocurrency is the central element of the S.E.C. test that these tokens are titles," said Lawson Baker, a lawyer and venture capitalist in the cryptocurrency industry. "Whenever you put XRP at work to defend it or buy goodwill, you will do harm to your case that you are not a security."
If regulators do not label XRP as a security, attention will return to the type of traction that cryptocurrency can achieve in the real world.
Ripple has publicized the success it has had with software called xCurrent, which helps banks move money between international accounts faster than existing alternatives. But xCurrent does not rely on the XRP token.
So who would risk using XRP?
Birla, head of Ripple's product, is betting that the first companies to use XRP will be remittances and money transfer companies that have to pay the banks to transfer money for them. The XRP comes with few commissions that are debited by the banks and, while the banking systems close on nights and weekends, digital tokens can be moved at any time.
Ripple announced this year that several large money transfer companies, including Western Union and MoneyGram, were doing pilot programs with XRP.
The Western Union CEO said last month that his first initial transactions with XRP did not show any clear advantage over the company's existing systems, but the company would continue to prove it, according to Fortune.
Currencies Direct is among a handful of small companies that have also tried XRP. The British organization transferred money between the United States and Mexico, and found XRP "on par or slightly cheaper" than its current method, said Brian Harris, the company's chief product officer.
But Currencies Direct does not plan to integrate XRP into its business right now, Harris said, because Ripple still does not serve most of the countries where his company works.
"I'm not in any of the markets we need them to be," Harris said. "It's a wait-and-see game about how I'm able to build that network."