Bank of International Settlements Affirms Ripple’s XRP Coin Is Centrally Controlled

Bank of International Settlements Affirms That XRP Is Centrally Controlled by Ripple

Is Ripple doomed by its centralization? The token often faces criticism because the supply of XRP is too centralized and about how the company is run. Last week, however, a bull run that made the prices of Ripple shot up to 100% seemed to put these issues away from the company.

According to the Bank of International Settlements, however, XRP’s network of trusted nodes is too centralized as they are almost all controlled by the company Ripple.

Centralization in XRP Makes It More Resilient Against Regulatory News

The research of the Bank of International Settlements, which was made by Raphael Auer and Stijn Claessens, had the objective of checking if cryptos were affected by national market regulations or not. The result was that the seven most popular tokens (Bitcoin, Bitcoin Cash, Litecoin, Monero, Zcash, Ethereum and XRP (Ripple) had their prices affected by the regulatory news.

Auer and Claessens used 151 regulatory news events in many important nations like China, the UK, the US, India and Japan to check out how the markets reacted to the regulations that were positive or negative. The study used many variables and they concluded that the crypto market is, indeed, influenced by the regulatory news.

The study showed that Bitcoin, its “clones” (BCH and LTC) and Ethereum reacted a lot to the news. Monero reacted even more and Zcash reacts less. XRP is another token that reacts less as it is very centrally controlled by its issuer Ripple, which makes this token distinct from the other ones in the market right now.

The Impact On Crypto Markets Is Real

The major finding of the study was that cryptos are, in fact, dependent on regulation, in spite of the crypto evangelists telling otherwise. Cryptos like bitcoin attracted the news because of their meteoric rise, but this has raised many concerns among regulatory authorities.

While cryptos are able to operate outside of the limits of national reach, their prices are not, as their transaction volumes and user bases react to the regulatory news. Generally, negative events like general bans on cryptos or disappointments such as the ETF situation in the United States drag the prices down while goods news make them go up.

Other regulations that seem to have a negative effect can be seen when they are treated as securities or their markets are too tightly regulated. News that shows the establishment of legal frameworks related to cryptos and Initial Coin Offerings (ICOs) coincide with strong market gains.

While the argument of the researchers for why most cryptos are dependent on the regulations makes sense (as people will have difficulties to use them if they are banned), their stance on Ripple is somewhat more hard to swallow.

Is the price of Ripple more stable because it is centralized? Is it not? The answer may come with time, but it will certainly be a very complex one.