XRP (Ripple), a card to stop the weak yen?...'Question mark' on its feasibility

▲ XRP, JPY/AI Generated Image

XRP has been identified as an international payment card that could stop the depreciation of the Japanese yen. The idea is to reduce foreign currency tied up overseas through 3-5 second settlements.

According to BeInCrypto on August 2 (local time), crypto analyst EGRAG CRYPTO argued that XRP could reduce the burden of foreign currency deposits for overseas payments by Japanese financial institutions. Japanese financial institutions pre-deposit foreign currency with overseas correspondent banks for international settlements. These funds can remain tied up for long periods without being utilized in Japan.

The method proposed by EGRAG CRYPTO involves converting JPY to XRP, then routing it through the XRP Ledger to convert it into the destination currency. Settlement is finalized within 3-5 seconds. This explanation suggests that Japanese banks and companies can keep more funds in JPY because they don't need to pre-accumulate foreign currency overseas.

EGRAG CRYPTO stated, “XRP cannot eliminate the interest rate differential that created the yen carry trade.” However, he argued that quickly converting export proceeds, investment returns, and remittance funds into JPY could reduce structural JPY selling pressure. The concept is to use XRP only as a bridge asset for payments, not as a reserve currency, and limit its holding time to a few seconds.

The barriers to commercialization are high. Sufficient XRP-JPY liquidity, clear regulations, licensed operators, custody systems, and integration with banking systems are all necessary. Large-scale XRP integration projects are not being pursued within the Japanese financial sector. Price volatility is also a burden that hinders stable international settlements.

The key variable determining the yen's movement is the interest rate differential between the US and Japan. The Bank of Japan (BOJ) has researched tokenized payments but has not adopted or endorsed XRP. The XRP concept is a way to speed up the return of overseas payment funds to JPY, but it cannot block the yen carry trade itself.

[Article Summary]

- A proposal has been made to reduce the burden of overseas foreign currency deposits for Japanese financial institutions using XRP.

- Utilizing the XRP Ledger, JPY can be converted to the destination currency within 3-5 seconds.

- Interest rate differentials, liquidity, regulations, and custody systems are hindering large-scale adoption.

*Disclaimer: This article is for investment reference only and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*