MoneyGram Received $11.3 Million in XRP from Ripple as ‘Money Development Fees’
- Ripple “won’t be profitable” if it doesn’t sell XRP – Ripple CEO Brad Garlinghouse
- XRP is down 94% from its ATH and its partner MoneyGram over 99%
- Ripple’s latest partner Azimo using ODL also revealed they will be paid by Ripple
Last week we reported that the 8-k SEC filing from MoneyGram showed that Ripple has paid a total of $11.3 million in 3Q and 4Q combined to the company to use its software and digital currency XRP.
MoneyGram had been booking these cash flows as revenues until SEC’s guidance required it to restate them as “contra expenses”.
MoneyGram also filed a 10k that revealed this compensation from Ripple was in the form of XRP cryptocurrency,
“The Company is compensated by Ripple in XRP for developing and bringing liquidity to foreign exchange markets, facilitated by the ODL platform, and providing a reliable level of foreign exchange trading activity. We refer to this compensation as market development fees.”
MoneyGram (MGI) Shares Down over 99% from its Peak
Ripple invested in MoneyGram in June 2019 that had the company's shares surging. However, MGI’s price performance hasn't been good for a long time. In May 2006, MoneyGram shares hit its all-time high at about $290 and since then they have been only going down.
Currently, MoneyGram shares are trading at $2.1. The time Ripple invested $50 million in the company, MGI shares were around $1.4
When it comes to XRP, the third-largest cryptocurrency by market cap is trading at $0.237, up 20% in 2020 so far while down 94% from its ATH of $3.92 in Jan. 2018.
Ripple wouldn’t be Profitable if it doesn’t Sell XRP: CEO
Ripple has recently started maintaining that Ripple and XRP are different arguing that if Ripple the company shuts down in the future, the digital asset XRP would continue to be in the market. However, 60% of the XRP supply is controlled by Ripple that it uses to onboard institutions.
For the last two quarters, the company has been cutting down on XRP sales after the community raised concerns on the price of the crypto asset tanking due to Ripple dumping XRP.
FT’s Alphaville stated that back in August 2019, in a conversation with Ripple CEO Brad Garlinghouse, on being asked if Ripple partners receive incentives to sign on with the company, he said, “it depends upon the shape and size and type and how high a priority” those institutions are. Garlinghouse clarified,
“We would not be profitable or cash flow positive [without selling XRP], I think I’ve said that. We have now.”
It’s Development Cost
Ripple’s latest partner Azimo who is using On-Demand Liquidity (ODL) that leverages XRP that helped save the company 30% to 50% in cross border transfers will also be paid by Ripple. Azimo CEO Richard Ambrose told Fortune,
“His company will be paid by Ripple, but that the money is to offset the technology investments it must make for its infrastructure.”
He said the payments are small in comparison to the cost savings the company will reap from using Ripple.
Asheesh Birla, SVP of Product at Ripple also said last week that the market development requires “a ton of work, effort, and resources” that costs money. He also said, this isn’t any different from Visa and PayPal using payment network incentives “to boost network adoption.”