IMF 2023 Doc Positions XRP as an Innovation to Improve Cross-Border Transactions

XRP has garnered traction from leading legal entities, such as the IMF, which recently published a document recognizing virtual assets as an option to improve cross-border payments.

XRP's journey in the crypto market has recently become a greener pasture and provides a good opportunity for itself, retail investors, and institutional investors. Notably, a document published by the International Monetary Fund (IMF) recognized the token as one of the options for improving cross-border payments.

The document, titled Trust Bridges & Money Flows," was curated in March 2023 by four industry experts, such as the IMF's Financial Counselor Tobias Adrian.

It discusses the issues encountered with inter-border payments and probable solutions for salvaging them.

The Challenge of Cross-Border Payments

The IMF document reveals that cross-border transactions are slow, opaque, and costly. These problems have been around for a long time, discouraging and minimizing the ability of customers to transfer money internationally.

The document claims these issues are associated with limited trust between financial firms and customers.According to the files, interoperability between local banks is simpler due to the trust established by the nation's central bank.

Moreover, interoperability becomes a challenge regarding transnational transactions because of the lack of a worldwide central bank. Thus, the participating banks must create their trust links without depending on a centralized institution.

Two approaches introduced to ensure that cross-border transactions are possible include pre-funding and credit models. However, they can also be slow and expensive.

Ripple (XRP): Probable Solutions

To mitigate the challenges related to cross-border payments, the IMF document suggests a broader use of swap lines, a transactional marketplace, and tokenized money. Moreover, this also introduces a case for consideration.

One major consideration for advancing international transfers is XRP. The paper discusses the recent successes of the private sector in mitigating the issues emerging from cross-border payments.Based on the paper, Ripple Labs is among the few private firms building a functional solution using XRP.

The paper highlighted three important models concerning the private sector: a private settlement asset and a trading place, like Ripple's XRP token. It further outlines the Stellar Foundation's and Strike's utilization of Bitcoin (BTC) and the Lightning Network.

Ripple (XRP) positions itself as one of the most efficient solutions to inter-border challenges due to its low cost and instant transaction time.

Ripple uses the virtual asset for its unique On-Demand Liquidity (ODL) services, and specific institutions on RippleNet have a chance to use it for cross-border payments.In a 2018 paper, the IMF acknowledged XRP facilitating effective cross-border settlements.

Though in May, HSBC, a leading bank, announced XRP Ledger's capabilities in transnational payments.By leveraging XRP Ledger, HSBC processed over three million inter-firm foreign exchange transactions, accruing to a massive $250 million in its first year.

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