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SBI Virtual Currencies opened their official website.

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@Gyru @LaBelleSaison @Dennis @Roborovskii Thanks everyone for your valuable inputs.  I have a naive question after reading you guys' reply.

It seems some Central Banks is getting involved.  If they decide to issue GBP.bankofengland OR USD.fed, by definition that would have no counter-party risk.  Wouldn't that be a better bridge currency?  Do I miss anything here?

Another concern I have is about government regulation (e.g., FinCEN KYC/AML).  Because bank needs to know the flow of the money precisely, would they allow their customer to purchase or hold XRP in their accounts? i.e., they all become coinbase in a sense.  Would that be allowed by the government?  Wouldn't that deter XRP's cryptocurrency's functionality (e.g., use in black market).   Because bank is unlikely to hold XRP in any meaningful amount, I am trying to think who is going to use and hold XRP in real world besides MM traders and speculators.  

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29 minutes ago, qwertyubb said:

It seems some Central Banks is getting involved.  If they decide to issue GBP.bankofengland OR USD.fed, by definition that would have no counter-party risk.  Wouldn't that be a better bridge currency?  Do I miss anything here?

The counter-party would be the central bank or govt itself. Looking at the geopolitical landscape today, that risk is something worth nothing. Remember Brexit. Perhaps with Trump you would get a Texsec (Texas Secession) *joking*.

32 minutes ago, qwertyubb said:

Another concern I have is about government regulation (e.g., FinCEN KYC/AML).  Because bank needs to know the flow of the money precisely, would they allow their customer to purchase or hold XRP in their accounts? i.e., they all become coinbase in a sense.  Would that be allowed by the government?  Wouldn't that deter XRP's cryptocurrency's functionality (e.g., use in black market).   Because bank is unlikely to hold XRP in any meaningful amount, I am trying to think who is going to use and hold XRP in real world besides MM traders and speculators.  

 Movements of XRP and IOUs on RCL is transparent and traceable. As of now, Ripple's focus is on remittances, but banks like SBI group are pushing for XRP to be used for PoS. Perhaps with more acceptance of XRP by consumers as a currency for payments, ordinary people would be holding onto XRP too.

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1 hour ago, Roborovskii said:

The counter-party would be the central bank or govt itself. Looking at the geopolitical landscape today, that risk is something worth nothing. Remember Brexit. Perhaps with Trump you would get a Texsec (Texas Secession) *joking*.

 Movements of XRP and IOUs on RCL is transparent and traceable. As of now, Ripple's focus is on remittances, but banks like SBI group are pushing for XRP to be used for PoS. Perhaps with more acceptance of XRP by consumers as a currency for payments, ordinary people would be holding onto XRP too.

1.  Regarding fiat money, this is something I understand. If Central banks do issue there IOUs on RCL, then there is no counter-party risk, though there is inflation risk.  USD = Federal Reserve Note. USD.fed is a liability to the Fed but an asset to everyone else (including banks).  USD.fed is always redeemable as 1 USD because they are the same thing.  USD.fed on RCL will be counted towards M0 and M1 money supply, but other banks' IOU are not.  USD can have inflation or devaulation in relation to other currencies, but no counter-party risk.  

Here is how it could be done.  Fed connects to RCL as a gateway that's only open to American commercial banks.  When commercial banks choose to exchange and deposit extra USD (beyond what's required as fractional reserve) at the Fed,  they will receive equivalent amount of USD.fed (just as physical cash), with no bearing interest.  In this way, USD.fed on RCL becomes digitized paper money with no counter-party risk.  Can this be done?  In this case, USD.fed is a real asset (like paper money).  If so, could USD.fed become the bridge?  USD is the default bridge in currency conversion at Forex anyway. 

2. Is XRP more trackable and transparent, and more difficult to hide than, for example, bitcoin?  For example, there would never be tumbler add-on developed for RCL, and moving in and out of exchange are highly regulated in the future.  If so, I would think this would be a big disadvantage. I doubt normal people would ever use XRP as a currency.  Besides traders and speculators like us, who would want to hold something with price going up and down and doesn't pay interest, in a world everything is priced in USD?   

You see, I am still trying to figure out real world use case for XRP -- either among the banks or outside the bank. 

Edited by qwertyubb

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24 minutes ago, qwertyubb said:

1.  Regarding fiat money, this is something I understand. If Central banks do issue there IOUs on RCL, then there is no counter-party risk, though there is inflation risk.  USD = Federal Reserve Note. USD.fed is a liability to the Fed but an asset to everyone else (including banks).  USD.fed is always redeemable as 1 USD because they are the same thing.  USD.fed on RCL will be counted towards M0 and M1 money supply, but other banks' IOU are not.  USD can have inflation or devaulation in relation to other currencies, but no counter-party risk.  

Here is how it could be done.  Fed connects to RCL as a gateway that's only open to American commercial banks.  When commercial banks choose to exchange and deposit extra USD on their balance sheet (beyond what's required as reserve) at the Fed,  they will receive equivalent amount of USD.fed (just as physical cash), with no interest rate.  In this way, USD.fed on RCL becomes digitized paper money with no counter-party risk.  Can this be done?  In this case, USD.fed is a real asset (like paper money).  If so, could USD.fed become the bridge?  USD is the default bridge in currency conversion anyway. 

When we are defining counter-party risk, we are defining it in the context of RCL. All IOUs have counter-party risk simply because there needs to exist a trustline. XRP is the only token that does not. This is the definition. So regardless of how big any government or central bank is, who are issuing IOUs on RCL, there is still counter-party risk.

In addition to the geopolitical issues which I have mentioned above, would banks and market-makers in China for example want to hold additional amounts of USD.fed? How about Russia, Germany, Japan even? The world is already awashed with US debt, so more of the same may not sit well with people. And for any party on the network that does not have a trustline extended to USD.fed tokens, XRP remains the most direct bridging currency there is.

24 minutes ago, qwertyubb said:

2. You see, I am still trying to figure out real world use case for XRP -- either among the banks or outside the bank. 

XRP's role within RCL is the perfect fit for bridging the multi-trillion dollar remittance market. That in itself is a REAL world use case. And with current banks' participation, it is moving along very quickly. What you are trying to find is 'Point of Sales' or 'payment' use, which banks like SBI are trying out in Japan. On the point of price stability please look for it here - https://www.xrpchat.com/topic/4565-ripple-for-dumdums-a-laymans-explanation/
 

To sum it up:

1. Yes there is counter-party risk for any IOU issued within RCL.

2. Yes there is a huge real world use case for XRP in the multi-trillion dollar remittance business.

Edited by Roborovskii

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On 5/13/2017 at 6:30 AM, Roborovskii said:

For those new here and do not understand the implications of this news:

  • The consortium of 47 (maybe more?) mainstream banks will be linked to SBI Virtual Currencies exchange.
  • This means Japanese wouldn't need to transfer funds to any other exchange to buy/trade for virtual currencies.
  • It also means that all current customers of these mainstream banks would have easy access and introduction to virtual currencies. They would not have obstacles such as verification/KYC, 4-6 days fund transfer time, etc.
  • It is highly likely that a large part of this exchange runs over RCL, with banks internal and local tokens through ILP.

Nice summary @Roborovskii!  The momentum that this adoption will generate is going to be historic

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How much liquidity is required to process enterprise transaction volumes? I don't think we are anywhere near.. really nice to see all this asian traktion.. its sad to see how eur lags behind on the xrp pie chart

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