Rumours are circulating about a possible partnership between the two American crypto companies Ripple and Coinbase.
All of this stems from a recent discussion at the OECD Global Policy Blockchain Policy Forum in Paris. In particular, the panel on digital finance regulation was attended by the head of Ripple’s global institutional markets team, Breanne Madigan.
During her speech, Madigan talked about their xRapid cross-border payment solution and mentioned Coinbase as an example of a company that could use it to move value around the world.
“We signed a deal with MoneyGram to help facilitate their cross-border flows. So there’s an example of, say, someone who lives in the US and wants to send Mexican pesos back to Mexico. So the way it works is, through our partnership, we send MoneyGram’s flow to one of what we call our originating exchanges – say it’s Coinbase in the US, as an example. The US dollars get swapped to XRP there and then they get sent across the border to a local exchange in Mexico, call it Bitso, in this example. Bitso then takes the XRP and swaps it into local Mexican pesos. And that consumer, or MoneyGram’s end consumer client, will receive Mexican pesos directly. And so we’ve delivered significant cost savings to MoneyGram in that example. Significant efficiency and so that’s a real value proposition to a company that’s affecting the end consumers because their fees will be lowered as a result”.
Therefore, according to these statements, xRapid would use Coinbase to exchange USD for XRP. It is not known whether this is done on an exclusive basis, perhaps as a result of an agreement between the two companies, or whether Coinbase is only one of the exchanges used by xRapid, but the fact that Madigan has expressly mentioned the American exchange has given rise to assumptions about a possible partnership between the two companies.
The problem that Ripple intends to overcome thanks to this type of collaboration is that of liquidity.
“If we want to start sending $10 [million] and then getting to $50 [million] and then getting to $100 [million], how are we scaling that liquidity? And so we’ve been strategically partnering with a number of market makers around how we establish contracts and incentives for people to want to engage so that as we send more volume through these channels there is depth of liquidity in the crosses that we need to support that flow. But the way that we’ve structured these contracts is such that we leave an opportunity for new liquidity participants to have incentive to enter. And we’re starting to see already […] a number of new liquidity participants are realizing there is a real arbitrage opportunity. We don’t have to then pay to incentivize people to make markets because there’s significant volume going to that corridor. And so, this is a first step in developing real deep liquidity markets in areas that never had it before. And we’re transforming the way money is sent across borders as a result”.
At this point, it seems reasonable to imagine that Coinbase is actually part of the markets selected by Ripple in order to be able to benefit from good liquidity, which allows it to exchange USD for XRP easily, quickly and at market rates. It would also appear that they have signed contracts for this purpose, albeit probably on a non-exclusive basis.
At present, there are no other details on this.