XRP Classified As An Exchange Token for Facilitating Cross Border Transactions
- Lack of regulator clarification challenges Ripple to fulfill its promises
- As US helped lead on Internet regulations, the UK taking important first steps
Ripple in its latest insight blog talks about the lack of regulatory understanding in the cryptocurrency and blockchain space.
Without clear and consistent frameworks, financial players and companies rely on outdated laws and rules. In payments space, this means tying up large amounts of funds in expensive pre-funded accounts. And still, it takes days for transactions to complete.
RippleNet, the company says was “developed to address this exact challenge.” The global payment network of Ripple speeds up transactions to instant settlement, transparency and eliminating the need for pre-funded accounts.
Lack of Regulator Clarification Challenges Ripple to Fulfill its Promises
RippleNet uses the digital asset XRP as a bridge currency for facilitating fiat currency transaction and further deliver these benefits at scale.
“this promise is challenging without effective frameworks and guidance on the use of digital assets,”
But with UK Financial Conduct Authority (FCA) announcing new efforts in July 2019, it has the potential to provide clarity for digital assets.
Ripple touches on the point of how FCA classifies digital assets as one of three types of tokens, viz. Exchange, utility, and security.
“XRP is classified as an exchange token because of its role in facilitating cross border transactions.”
As US Helped Lead on Internet regulations, the UK taking Important first steps
By issuing classifications, the FCA makes it clear which digital assets fall under its “regulatory perimeter.” It further points out how FCA has demonstrated which types of tokens will be regulated as securities and which will not, and XRP clearly isn’t.
These clear guidelines are essential to recruit new companies and promote emerging technologies that can lead to job gains and tax revenues.
Ripple further compares FCA’s digital assets classification with the evolution of early Internet regulation in the late 90s.
Just like the US helped lead on Internet regulations, the UK is taking important first steps to regulate crypto assets.
“Countries that take the lead on these frameworks will be better positioned to attract capital, companies and jobs—particularly since blockchain technology is here to stay.”
Moreover, it states, FAC’s guidelines can serve as an example for other countries, providing much needed regulatory clarity allowing
“digital assets and blockchain to thrive.”