There are several blockchain projects in the cryptocurrency market. Two of the most important are Ethereum (ETH) and Ripple, which uses the XRP virtual currency for some of its products.
Ripple, represented by the XRP virtual currency, grew by about 13% in the last days after the rumors concerning a bank that wants to use Ripple's services. Ripple aims to improve the services provided by financial institutions and banks. The intention is to speed up payments and cross-border transactions between institutions.
It is possible for companies to start using RippleNet and XRP virtual currency to reduce costs at the time of transaction and processing time.
However, there are only a few problems with Ripple plans. Banks could easily start creating a dollar token, replace XRP or another virtual currency and start trading with other banks and institutions. However, this is something that needs to be improved and that requires trust from other companies. How can you be sure that there is a legal dollar behind every tokenised dollar?
In effect, banks do not trust each other. This is why banks work with the monopoly clearing system known as SWIFT. But there are public blockchains that can replace that system. Banks could improve their systems in some respects by adopting XRP or other blockchain solutions, but they will also rely on traditional systems until a new product enters the market.
Banks do not want to lose control. They want to stay in charge of everything they are doing now. This is why they are working with private networks based on Ethereum and make a decision if Ripple and XRP are better than these authorized networks. It can also be a possibility for financial institutions to shell out Ripple and use another token that depends exclusively on banks rather than a company like Ripple.
These banks can still accept virtual currencies if they offer related services. For example, they can provide encrypted bank accounts. Banking applications show national and foreign currencies, but it may be advantageous to start offering virtual currency services.
For example, a financial company could display user funds in Bitcoin, Ethereum and even in US dollars or euros. However, banks would not need to be physically available. They can only be online banks. Or we go even further, a bank could just be an intelligent contract in which the user holds all the funds. But this can take many years to become a reality.
About Ripple, which has improved its presence in the virtual currency market and the financial world, a few hours ago, XRP was able to overcome ETH as the second most valuable virtual currency. At the time of writing, Ethereum managed to recover its second place in the market. Ethereum has a market capitalization of $ 22.51 billion and $ 21.31 million of XRP.
Ripple could eventually replace the SWIFT system in the future, allowing the financial sector to function without problems compared to the current one. Some banks may use US dollars for local transfers in the United States or another legal currency depending on the country. However, cross-border transfers could be performed using XRP and RippleNet.
However, as mentioned above, banks will not allow XRP and Ripple to take part in the market of currently owned banks.