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...is xrp's potential for being used as "reserves." I came across this article that discusses the concept of "forex reserves:" http://www.nbdpress.com/articles/2017-06-08/2632.html Before reading this article, I've heard the concept of xrp "reserves" being purchased by individual companies or market makers as a tool for managing risk and being able to profit from volatility. (source: _https://www.xrpchat.com/topic/5280-valuation-models-xrp-the-digital-currency-vs-ripple-the-company/?do=findComment&comment=50182_) The concept was always part of a larger topic, and I guess I made a mental note and just kind of said to myself "Well, yeah, that would be cool. I wonder if that would happen with a large retailer like Amazon that does international commerce." I left it there in my thinking, like a shiny bauble that might get my attention again at some point in the future. After all, I'm focused on the big fish - the possibility of RCL taking over for SWIFT. And then I read a simple group of words from this article, and realized I'd been missing the power of a concept all these years. Here's the snippet: Did you catch that amount of USD that China uses for the sole purpose of ForEx? 3.05 trillion. The Concept Nation-state federal reserves will usually carry the main unit of currency used to make ForEx transfers. And currently, US Dollars are the de-facto currency used to do those transfers. What is SAFE? (source: https://en.wikipedia.org/wiki/State_Administration_of_Foreign_Exchange) USD is Currently King of Reserves So how do we arrive at how much USD some other countries might just "store?" To do this, we need to compare the relative size of China's economy with other nations, and do the multiplication. Let's do this with a few different countries where Ripple has already established trade pairings: GDP of China: 11,218,281 ---> 3 trillion in reserves Japan: 4,938,644 ---> 1.3 trillion in reserves? UK: 2,629,188 ---> .7 trillion in reserves? India: 2,256,397 ---> .6 trillion in reserves? South Korea: 1,411,246 ---> .37 trillion in reserves? Basically, we can roughly estimate that these combined countries store approximately 6 trillion USD in reserves. Also, consider the fact that I'm not even considering businesses within these countries. Large companies tend to want to keep their own reserves of USD for exchange as well. And these companies can store very large quantities of USD in their corporate treasuries as well. I don't *think* nations would ever store a digital asset issued by a private company as a reserve, or if they did, it would be for boutique purposes most likely. A more likely scenario under the current system would be central reserves creating their own IOU on RCL. However, we can use the concept of "reserve" to understand how very large companies might want to snap up XRP at large quantities. So now, go back to the articles here on XRPChat where JoelKatz was talking about the concept of "reserves," and now three of his points should make more sense: (source: _https://www.xrpchat.com/topic/5280-valuation-models-xrp-the-digital-currency-vs-ripple-the-company/?do=findComment&comment=50182_) This is the way currency "reserves" work now for nations - and for large companies - and it is a very exciting prospect for XRP! What About the Future For World Reserve Currencies? There is a possibility that XRP could play a role in national reserves: In an exciting development, a report by the UN Conference on Trade and Development calls for abandoning the US Dollar s the single reserve currency. It says that the new reserve system should (Source: http://www.reuters.com/article/us-dollar-reserves-un-idUSTRE65S40620100629 ) The report goes even further: IMF Connection to Ripple So now we see the connection to the IMF, and now we can understand much better what Chris Larsen (and Ripple's) role *might* involve with the IMF Advisory Committee. If the SDR's are going to operate using a "basket of currencies", what technology do you think is best for representing that basket using an IMF-backed, redeemable IOU? Seriously? This type of usage couldn't be a better fit for RCL and XRP. Is your crypto portfolio on the right side of history? ###### DISCLAIMERS ###### THIS IS NOT INVESTMENT ADVICE PLEASE DO NOT TRADE CRYPTO WITH LEVERAGE I DO NOT HAVE ANY INSIDE INFORMATION I STILL OWN MTG CARDS
My understanding is that the goal for XRP is to become a reserve currency similar to how USD is nowadays. I also understand that the strategy of Ripple is to first target smaller or less transacted currency corridors for example, Guatemalan quetzal to South African Rand. What are the advantages to using xrp in those cases as opposed to just using the US dollar?
There is one thing that I am struggling to get my head around with respect to volatility and payments... Let's say I am a big company and I need to pay $10m to a creditor for whatever reason. (Let's just say 1 XRP equals 1 USD at time zero) Step 1: I buy my XRP10m give the bank my $10m Step2: The bank does an immediate transfer of my XRP10m to the other party/bank Step 3: The receiving party/bank converts this XRP10m into USD (to expunge my obligation), but due to the fairly extreme volatility the price is now .99c instead of $1, therefore the receiving bank/counterparty didn't receive $10m but $9 900 000. The $100 000 was lost due to currency volatility...that's a problem for the ultimate receiver of the currency. Okay so what if the original invoice WAS in fact in XRP...well then I have a whole new problem with respect to accounting/GAAP/IFRS that will come into play as XRP is NOT a currency... I can carry on all day with examples of how this would be a nightmare to implement if you are a publicly traded company... As a fairly experienced global corporate treasurer I would love to get a better payment system than the banks and SWIFT and I have seen some presentations on the "Ripple" software, which is very interesting, but using XRP in a large corporate might be more trouble than its worth. Any comments appreciated as I don't want to look like I am bashing this, but international treasury is what I do EVERY day and I can't work out why I would even consider XRP as a payment currency. There are also no NDF's, Forwards, options or derivatives that I could use to hedge my XRP exposure...