In a shocking statement, Ripple’s chief cryptographer David Schwartz announced that US banks are unlikely to utilize distributed ledgers (blockchain technologies such as Ripple) to handle international “cross-border” financial transactions due to low scalability and privacy issues. The announcement is a major setback for Ripple, dubbed the “future of finance” by many experts.
In an interview with Reuters this week, David Schwartz, chief cryptographer of the world’s third biggest cryptocurrency Ripple, said that while he believes banks recognize the potential of blockchain technology and a product like Ripple in reducing transaction time and costs, the technology is as of yet not scalable to be implemented into banking operations.
“I will concede, we haven’t gotten there yet” says David Schwartz
The setback is particularly shocking, as it would seem nobody – including Schwartz – saw it coming. Since 2017, more and more banks had become increasingly excited about the innovations Ripple could bring to the world of banking and finance, and had been increasingly vocal about employing the technology which enabled an organization such as a bank or an online payment service like PayPal to handle vast numbers of transactions in seconds and at a fraction of previous costs.
Ripple’s own xCurrent protocol provided banks with the option of instant settlements, making it superior to any existing payment network. Several banks had indeed tested and even deployed xCurrent, which uses “bi-directional messaging” that can plug into distributed ledgers. However, while the feedback was universally positive, as Schwartz grimly stated, xCurrent’s technology itself “is not a distributed ledger.”
Banco Santander Proof That xCurrent Really Works
However, despite Schwartz’s negativity, Spain’s Banco Santander, one of the biggest and most important banks in Europe is proof that xCurrent works. Banco Santander used xCurrent to build its international money transfer service OnePay FX, which was launched in April. At the time, OnePay FX was hailed as one of the first concrete uses of blockchain based technology, and is proof that xCurrent can indeed be integrated into a bank’s infrastructure.
Ripple’s Senior Vice President of Customer Success Marcus Treacher said that with xCurrent, the Ripple company had launched a project designed to provide banks with “classic” blockchain payments. However, US banks rejected this offer because they couldn’t “put the entire world on the blockchain.”
“We started out with your classic blockchain, which we love. The feedback from the banks is you can’t put the whole world on a blockchain.”