How Ripple tripled to outshine bitcoin

Surprisingly, perhaps, bitcoin is not the big news in the crypto world this week. It's spent the better part of the past few days in consolidation mode following the stellar gains of recent weeks and the introduction of futures dealing in the US (CBOE) last Sunday. The Chicago Mercantile Exchange introduces bitcoin futures on its exchange on Sunday 17 December.

Despite more subdued trading, bitcoin is still up 8% to $18,028 in the past 24 hours according to Coinmarketcap.com (Coinbase quotes bitcoin at $17,600, up 5.3%), testing its all-time high. However, it is rival coin Ripple that has picked up the baton as far as astronomic price rallies are concerned.

Languishing in a range of $0.20-$0.26 for the better part of the year, Ripple has leapt from $0.25 to $0.82 over the past 48 hours or so, a more than three-fold increase, catapulting it to third place in the market capitalisation league table of cryptocurrencies, with a valuation of $30.7 billion.

Ripple, originally named Opencoin and established in 2012, is designed for cross-border money transfers by financial institutions and has none of bitcoin's issues regarding the scaling-up transaction processing. The Ripple payment protocol also facilitates conversion in and out of fiat currencies. It can currently handle 1,500 transactions per second.

Big in Asia

Reports surfaced on Wednesday that the Japan Bank Consortium, representing 61 banks, and two major South Korean institutions, Shinhan Bank and Woori Bank, were working together on implementing same-day cross-border money transfers, with trials due to start today.

A report by Japanese news organisation and Financial Times owner Nikkei reported that the banks taking part in the Ripple trial expect to be able to cut the cost of international transfers by as much as 30%.

The Japanese banks involved in the trials include Sumitomo Mitsui Bank and Resona Bank.

SBI Ripple Asia had in fact previously announced in September that the trials would be in place by year-end, but the confirmation this week lit a fire under the Ripple price.

Buying of Ripple, and Litecoin which has also zoomed higher this week, is being driven by South Korean investors, despite continued moves by regulators in the country to try and cool down rampant interest in cryptocurrencies.

The Korean financial regulator, the Financial Services Commission, banned initial coin offerings (ICOs) at the end of September, although ICO promoters did not have to return funds to investors and citizens are still allowed to invest in ICOs based abroad. Also, this week exchanges were told that no new account openings would be allowed until Know Your Customer processes had been put in place.

Reuters reported that on Wednesday an emergency government meeting took place at which it was proposed that cryptocurrencies be subject to capital gains tax, and that minors be banned from owning the asset class. The proposed measures will first have to be approved by parliament. South Korean financial institutions are already banned from handling cryptocurrencies.

South Korean consumers are known to be far more receptive to new technologies than their counterparts in the West, and their embrace of digital currencies is a further indication of this, even if bitcoin as a means of exchange is still far from achieving mass adoption.

There are one million registered cryptocurrency traders in South Korea, which equates to one in 50 of the total population, according to the MIT Technology Review.

Europe playing catch-up

Progress in the West in implementing blockchain technology is more pedestrian, but European banks Credit Suisse, Barclays and UBS announced they were trialing a solution to implement an aspect of the European Union's Markets in Financial Instrument Directive (MiFID 2) financial securities regulations.

All banks and brokers have to be compliant with MifID 2 by 4 January 2018 and, among other things, it requires all financial institutions to have Legal Entity Identifiers (LEIs) to uniquely identify the legal parties involved in financial transactions.

The project, which uses Ethereum smart contracts but will run on a private blockchain on Microsoft's Azure cloud platform, has been spun out of the Level39 innovation lab in London, and was initiated by UBS. The system allows the transaction parties to be alerted in real-time to any discrepancies or anomalies that might affect security, and there are plans to implement resolution features.

Emmanuel Aidoo, head of blockchain strategy at Credit Suisse said of the efforts: "This is an important project as it establishes blockchain benefits in a broader context than clearing and settlement. The use of blockchain to solve real-world regulatory requirements in a cost-effective way is very appealing."

Data provider Thomson Reuters is also involved in the project.

Ethereum reached its own record high this week, touching $780, although is down nearly 10% today.

In other news, there are persistent rumours that US-based exchange Coinbase will be introducing new coins to its platform, among them Ripple (XRP) and possibly Monero (XMR). Litecoin was seen as an indirect beneficiary of the recent bitcoin price hike because, alongside bitcoin, it is one of the other two cryptocurrencies listed by the exchange, the third being Ethereum.

Market watchers expect the Christmas holiday period to ignite a fresh drive upwards for bitcoin, with word of mouth and the fear of missing out providing the energy mix for the propellant.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.