Ripple On-Demand Liquidity (ODL): Using XRP for Payments

Bittime - After the end of the legal dispute between Ripple and the SEC, the topic of using XRP is back in the spotlight. 

Ripple, through Chief Technology Officer (CTO) David Schwartz, provided clarification regarding the company's ability to use XRP in their payment services, especially in the context of On-Demand Liquidity (ODL). 

Despite concerns regarding the impact of the SEC ruling on ODL, Schwartz emphasized that Ripple can still use XRP for ODL transactions, albeit with some limitations.

Impact of SEC Ruling

After Ripple was fined $125 million by the SEC for securities violations, Judge Analisa Torres issued an order prohibiting Ripple from selling XRP to institutions in the future. 

This decision has raised confusion regarding the future of Ripple's ODL service, especially in the United States. 

Some critics, including “Scam Detective,” argue that this ban could also impact Ripple's use of XRP for ODL transactions.

Read also: XRP Trading Volume Skyrockets 235% in a Day

Clarification from David Schwartz

Responding to these concerns, David Schwartz explained the difference between “using” XRP and “selling” XRP. 

According to him, although Ripple may not currently actively use XRP for ODL transactions with partners in the US, the court order does not completely prohibit Ripple from doing so in the future. 

Schwartz also emphasized that the impact of the order focuses on sales, not usage.

Legal analyst Bill Morgan also agrees that even if pre-lawsuit XRP sales are taken into account, future ODL transactions in the US still face uncertainty without a registration exemption. 

Ripple currently does not use XRP in the US corridor, and this will likely continue, which could reduce demand for XRP.

Ripple Payment Flow

To provide a clearer understanding, Schwartz referred to documents explaining how Ripple handles payments. Once the sender enters payment information, Ripple validates and approves the transaction. 

Once approved, the payment partner ensures compliance before completing the transaction. The XRP is then moved and converted to the destination currency.

Industry Outlook

Schwartz's views align with those of industry experts, including CapSign founder Matt Rosendin and attorney Jeremy Hogan. 

They also stated that Ripple can still utilize XRP for payments despite the SEC order. 

Crypto analyst Mr. Bojangles, provided a more detailed view, that Ripple can continue to use XRP for ODL in the US, provided they comply with SEC regulations.

To do so, Ripple would need to register XRP sales with the SEC or use exemptions such as Regulation D for private placements, Regulation S for international transactions, or Rule 144A for sales to qualified institutional buyers. 

Ripple must also implement strict KYC and AML practices, automate compliance with smart contracts, and keep detailed records. These steps ensure Ripple can maintain the efficiency and benefits of ODL, such as fast settlement and lower fees, while remaining compliant with legal requirements.

Conclusion

Despite legal challenges from the SEC, Ripple still has a chance to continue using XRP in their payment services, especially in ODL. 

With the right approach and regulatory compliance, Ripple can maintain its position as a major player in the digital payments ecosystem, while leveraging XRP as an efficient liquidity tool.

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