Ripple, a blockchain company and rival to bitcoin, on Thursday announced a tie-up with Dallas-based money transfer giant MoneyGram.
The move is significant because the arrangement involves the use of XRP, Ripple’s digital currency, which has recently soared in value but also faced questions about its practical uses.
MoneyGram is currently testing the company’s XRP cryptocurrency in an attempt to see if Ripple’s blockchain technology can speed up transfer times and lower costs. Ripple’s XRP has climbed as well, according to the Business Insider.
According to Ripple, an average transaction on its network will only take between two and three seconds to process. On the other hand, Bitcoin transactions currently take around 51 minutes on average to process, according to data by Blockchain.
On Thursday, Brad Garlinghouse, the CEO of Ripple, said in a statement that banks are not the only businesses that are affected by ineffective global payments, but institutions such as MoneyGram are also dealing with the same issues.
While banks around the world are experimenting with blockchain (the underlying technology behind bitcoin and Ripple) to lower money transfer costs, skeptics of Ripple say its XRP currency is unnecessary to carry out transactions.
Garlinghouse, however, makes the case that XRP obviates the need for money transfer shops to maintain local currency accounts (so-called nostro and vostro accounts) in far-flung locations. In an earlier interview, he told Fortune that the use of XRP will allow firms to free up idle capital for other purposes.
This notion of using digital currency as a form of bridge funding is not unique to XRP. Last year, IBM and a consortium of banks in the South Pacific announced a blockchain transfer arrangement that entails the use of a cryptocurrency called Stellar.
For MoneyGram, the tie-up with Ripple may provide a way to maintain its share of the money transfer market. Like its longtime rival Western Union, MoneyGram has faced competition from a new generation of low-cost Internet-based services like TransferWise.
“Every day blockchain technology is changing the norm and encouraging innovation. Ripple is at the forefront of blockchain technology and we look forward to piloting xRapid. We’re hopeful it will increase efficiency and improve services to MoneyGram’s customers,” said CEO Alex Holmes in a statement.
Ripple’s venture with MoneyGram comes several months after the company announced a partnership with American Express. And in November, a prominent tech figure, Michael Arrington, announced the creation of a $100 million hedge fund denominated in XRP.
As of last Thursday, XRP has lost about a third of its total value. Nonetheless, XRP is up more than 700 percent since December of 2017. Just last year, XRP was just $0.006687 per coin, according to Tech Crunch. Currently, there are 38.7 billion XRP in circulation around the world. According to CoinMarketCap, XRP is currently the third most-valuable digital asset.
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