Chinese Partner Proves XRP More Tenable Than Bitcoin

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By Gaurav S. Iyer, IFC Published : February 8, 2018

ripple priceRipple News Update

This week, Ripple announced a partnership with Chinese payment provider LianLian Yintong Electronic Payment Co., Ltd. (Source: “LianLian International Joins RippleNet to Provide Faster Payments into China,” Ripple, February 7, 2018.)

The Hong Kong-based financial giant will use Ripple’s “xCurrent” software to provide its clients with near-instant cross-border transactions. This is huge Ripple news.

For one thing, LianLian is giving Ripple its first official payments corridor into China. But more importantly, this proves what I’ve been saying for months: XRP will usurp Bitcoin because it is not trying to burn down the existing financial order.

Now, I understand that LianLian is not using XRP to settle trades…yet.

But Ripple’s gameplan has always been to attract a ton of financial firms, add them to “RippleNet,” then slowly ease in the idea of XRP as a liquidity tool. It is a long, slow process.

Ripple (XRP) Price Chart

ripple price chart for 8 feb

The material point, however, is that Ripple can operate in China—and Bitcoin cannot.

Like most cryptos, Bitcoin was banished from China by a cryptocurrency trading ban issued in September 2017. Ripple was allowed to stay despite the widespread crackdown. To be clear, investors cannot exchange yuan for XRP, but it doesn’t really matter given that the company can sign enterprise partnerships with banks and other payment providers.

I wrote about this at the time because it was so strange.

China runs a state-controlled economy, meaning that it can admit or reject any foreign business it chooses. Why let Ripple into the country? Some readers speculated it was because Ripple was secretly partnering with Alibaba Group Holding Ltd (NYSE:BABA), but those rumors went unconfirmed.

My theory is a little different. China is embracing innovation, but it wants tangible benefits from emerging technologies. The high-minded ideals of Bitcoin have no place there, but Ripple can genuinely lower transaction costs across the financial system. And it works with localized entities, serving only as a bridge between autonomous agents.

This system is compatible with China’s governing sensibilities.

My guess is that this will be true in more places than China. Disintermediation is not exactly a popular idea among elites. However, since they have to pay lip service to blockchain (as we saw in Davos), they could strike a compromise by going with Ripple.

Analyst Take

We continue to believe that XRP prices are deeply undervalued. Assuming that adoption and transaction volumes continue to improve, we maintain our $10.00 Ripple price prediction for 2018.

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