Below is the transcript of an exclusive CNBC interview with Brad Garlinghouse, Ripple CEO, and CNBC's Arjun Kharpal at Money 2020 in Amsterdam
AK: So Brad, Ripple's technology allows big cross-border, cross-currency transactions using blockchain technology, it settles much quicker and cheaper than current processes too and with a lot more transparency. But you also issue a token known as XRP, can you run us through how these work and what the relationship is?
BG: It's a great question and it's an important question because I think there's been a lot of confusion and misinformation. There's a company called Ripple, and Ripple is focussed on solving the exact problem you described. How do we make cross-border payments massively more efficient, for remittances for corporates. We use a digital asset called XRP as part of that flow and we use XRP because it's a thousand times faster than bitcoin transactions and a thousand times cheaper than a bitcoin transaction. We think that the utility of XRP is such that it's the most efficient digital asset to solve this problem on cross border payments. So, Ripple the company is really building on top of this open-sourced eco-system that I call the XRP eco-system, and Ripple's building vertically on top of that – as a payments company.
AK: You, you've signed up a lot of real-world clients, big banks as well, and they're using your xCurrent products as well, but not necessarily using the XRP token which has prompted a few people to ask, you know, what's the value of XRP if it's not being used on a wide-scale right now. How do you respond to that?
BG: Well the first problem that Ripple focussed on is really engaging with those banks to solve a real-world problem for them. So we've been successful, as you mentioned, signing up over hundred banks using a product which we call xCurrent, and xCurrent allows two banks to settle in fiat, but basically in real-time. Today that takes days, it's very expensive, it has a very high air rate, it has six percent. So that that works when there's two banks that are working together that already have fiat. If we wanted to go to a third bank where we don't have liquidity, where we don't have a prefunded account, that's where products like XRapid comes into play. XRapid uses XRP to fund real-time liquidity, so no longer do I have to prefund. There's trillions of dollars parked around the world, prefunded in between banks, between corporates, corporates at banks, and if we can make that – those trillions of dollars more efficient we make the entire global financial ecosystem more efficient.
AK: And when do you expect those, that kind of product, to actually be rolled out a little bit more? I mean you've obviously done the initial work..
AK: …getting some of those banks on board to the xCurrent product, so when does XRP begin to become more useful to…
AK: …those institutions?
BG: So we launched X-rapid, the product we were just talking about, we launched that as a beta product late Q3, early Q4 last year. We announced our first pilot to customers on XRapid in late Q4. We announced six more in Q1, and these are big names in the remittance world, names like Western Union and Moneygram, and Mercury FX, these are companies you know moving a lot of money and what we have found is that XRapid is saving them between 40 and 70 percent compared to their existing tools from managing and spreading liquidity around. So XRapid is doing exactly what we thought, we expect it to go into production with that product out of beta production very very shortly, and we think as we continue to move from a beta product to a product we'll see more and more banks, more and more other financial institutions get on board.
AK: And that will be used in the XRP token in order to facilitate these processes?
BG: That's exactly right. The point I've made continually as I've heard sceptics really spread misinformation, the point I've made repeatedly is if we can deliver a better product for a better price banks and other financial institutions will get on board.
AK: How do you value XRP? We've seen many people try to you know go up above three dollars and drop back down. What's your outlook as you see this product being rolled out across major financial institutions about the value of this?
BG: I think the value of any digital asset is going to be derived by the utility that it creates. So I think there's a lot of hype in this space and I think as the hype and the reality come into equilibrium those markets will be less volatile, and I think what we're seeing today is a very nascent market, there's a lot of volatility. I don't know how to predict the price of XRP, I wouldn't even dare try. We're one player in the XRP eco-system but there's other players as well and so I think as we do things that enhance the utility of XRP we'll continue to see that eco-system grow and be healthier and healthier.
AK: Do you have an outlook or an aspiration or ambition as to how many institutions you hope will be using this token to facilitate these real-world transactions, by say the end of the year or even the end of next year?
BG: Well I've publicly stated that by the end of this year I have every confidence that major banks will use XRapid as a liquidity tool this calendar year. You know, by the end of next year I would certainly hope that we would see you know in the order of magnitude dozens. But, you know, we also need to continue to grow that eco-system, grow the liquidity, and it all comes back to if we're solving a real problem for real customers. There's so many different examples of this this space, there's ICOs where I don't really understand the problem the token is solving. Those are ones where I I'm very sceptical about what the future of that value looks like.
AK: Right now by market capitalisation XRP is the third largest token on the market, behind Ethereum, behind Bitcoin, do you believe it has the ability to displace both of those as the largest, given the belief you have in its utility?
BG: Well I don't really think about it as one versus the other. I mean it's actually unfortunate I think that there's some people in this, the crypto space, the blockchain space, for them it's almost a holy war of one versus the other. I don't look at that at all. I think that what we're seeing is the overall growth of this space and there will be many winners. And I'm actually, and I've publicly shared that I am long bitcoin, I am long bitcoin cash, and I think they will continue to be many boats that rise as the sea rises around the blockchain space overall.
AK: Talk to me about how you actually see bitcoin panning out. We've had for example Jack Dorsey, the CEO of Twitter, says that he believes this could be a global currency in about ten years and we know that bitcoin at the moment doesn't act like a currency, its high transaction times, it's expensive, it's volatile. So what does bitcoin's role be in the future? Does it have a role?
BG: I think bitcoin will have a role. I think it's not going to be the panacea that people once thought it would be where it would solve all of these different kind of problems and instead you're seeing specialisations of different kind of ledgers, different kinds of blockchains. The bitcoin blockchain is quite slow. Originally people thought it might solve a payments problem but when you have an asset like XRP that's a thousand times faster and a thousand times cheaper on a per transaction basis bitcoin can't really compete on that level, you know an XRP transaction costs fractions of a penny and it settles in three seconds. Comparatively you have bitcoin taking you know 45 minutes, sometimes hours to settle a transaction, and it can take you know the cost can be three dollars to 30 dollars. So that might cheaper than the alternative in today's banking system but it's not really an internet of value, a true step forward in how we can allow value to move the way information moves today.
AK: So what do you see bitcoin being then in the eco-system? Is it just, is it a store of value or not?
BG: I think it is a store of value. I mean, I, look, we as a world have decided to store a value to a tune of about a 130 billion dollars – not sure of the current market cap – but that's a store of value, it's hard to argue that.
AK: Governments have talked a lot about trying out fiat versions of digital currencies of some sort. It's experimental with its thoughts of the moment. But will these work and what do you see the advantages being if governments begin to issue fiat digital currencies?
BG: Well it's kind of funny. I don't, if I reached into my wallet right now and I took out a bill, bills already are digitised in some ways. They have a serial number, right. And you think about well it has a serial number, what's the difference between being tokenised as a digital asset and tokenised with a serial number? We can argue that a little bit but the point being I think that banks, central banks, governments, if we have a better solution, a more efficient solution then people are going to use that. And when we think about that for Ripple and what we're using XRP for you still have the need for a cross-border transaction. You're still getting an in and out of pounds or Euros, or dollars, or Yen, around the globe, and so we're going to continue focussing on that. We think that those that believe that cryptocurrency is a challenge to fiat, I would disagree with that. The dollar where I live is quite efficient. The pound is quite efficient. Here in the Netherlands certainly the Euro is very efficient.
AK: Right, I want to get your thoughts as well on a separate issue. There's been a lawsuit filed against Ripple the company, alleging that XRP is a security, it's a quote "performing a never ending initial coin offering". How do you respond to some of those claims as well?
BG: My my view on this is pretty outrageous. Here's somebody who held XRP for I think two weeks' time and is making some claims – you know, whether or not XRP is a security is not going to be dictated by one lawsuit. The SEC has obviously, the SEC, the United States is the governor of that and I think it's very clear that XRP is not a security, you know, it does exist independently of Ripple the company. If Ripple the company is shut down tomorrow the XRP eco-ststem would continue to exist. It's an independent, open-sourced technology. From an ownership point of view, owning XRP doesn't give you any ownership of Ripple equity. And also, as we just talked about, XRP has a lot of utility, so to me it's quite different than what a security you know looks like and I think ultimately we'll find that conclusion.
AK: Is regulation a tool or risk to you business?
BG: Actually, I think regulation is a benefit to our business. I think those that think the blockchain revolution is to attack the government or attack regulation is wrong. You know the blockchain revolution is happening from within the system not outside the system. I think that one of the reasons why Ripple has enjoyed so much momentum is because we've been working with regulators. We count the Bank of England as a customer of ours. The Saudi-Arabia Monetary Authority is a customer of ours. We're working with other central banks around the world and I think it's because of that engagement we're continuing to see them embrace and see the benefits of using these technologies.
AK: What happens if XRP is classed as a security? What does that mean for your XRapid product for example?
BG: I, I, I can't think of any arguments why XRP would be deemed a security and so I I'm not too worried by it.
AK: And just a real final quick one. We saw cryptocurrency market sore to record levels last year but that a bit of that air has come out, is that just a short-term blip in what is a longer term growth story for this?
BG: Yeah, I mean look, it's hard to predict the the gyrations of those markets. I think they are as I said earlier, a kind of nascent market and they've seen a lot of volatility. If we create a lot of value by solving real problems for real customers the hype and reality will solve that and I think you've seen hype get ahead of reality in many markets and certainly in this market as well, but I think as we see this play out not over three days or three weeks or three months, but over three to five years, I think you're going to see some you know more rational behaviour and the markets behave as you'd expect as they grow.
AK: Thank you so much Brad, appreciate your time.
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