Key Insights:
The Ripple and SEC meeting is now believed to have set the stage for blockchain adoption inside the US Govt.
SEC's proposal paper on using XRPL could replace the aging, inefficient, and much slower SWIFT system.
The funds saved as a result of switching from SWIFT to XRP Ledger could be used to fund Bitcoin acquisition worth $7.5 billion a year.
Govt. adopting XRPL could quicken the process of widespread corporate adoption.
Since XRP is the main token used for transaction fees in XRPL, it could see a much larger boost than any other in its history.
The SEC has brought a revolutionary proposal to cut the government spending on transaction fees and use the funds to acquire more Bitcoins via the XRP Ledger.
The proposal seeks to use the XRP Ledger in place of traditional methods like SWIFT which are slower, inefficient, and centralized. Around 30% of the US Government's $5 trillion in foreign banks (Nostro accounts) would be brought on the XRP Ledger (via Ripple ODL), and these will be used for government transactions.
Further, as the government starts using XRP Ledger, it is presumed that it could save at least $7.5 billion each year, which, as per the SEC would be used to purchase Bitcoins. This strategy is a part of Donald Trump's budget neutral Bitcoin acquisition plan that puts no extra burden on taxpayers to acquire Bitcoins.
SWIFT is the international inter-bank messaging system that is used to settle cross-border payments between two banks in different countries. In the present global financial landscape, it is the predominant way of settling cross-border and inter-bank payments.
The SWIFT banking system in its current format is set to end on 22 November 2025.
Nostro accounts are the deposits of one bank held in another bank in another country to provide liquidity for cross-border payments. At present, the global financial system has around $27 trillion in Nostro accounts, out of which the US Govt. owns roughly $5 trillion.
Besides making government transactions more efficient, the paper also clearly delineated how more Bitcoins would be acquired from the markets.
Before the US elections, Donald Trump's promises centered around the government acquisition of Bitcoin to support crypto markets and use it as a strategic reserve.
On Trump's election, the president passed an Executive Order that Bitcoins would be acquired in a budget-neutral way, which means there would be no additional tax burden for this acquisition.
Crypto markets misunderstood it as a denial of Bitcoin purchase. However, all the government did was to find a way to free-up more money to finance Bitcoin purchases rather than buying them from the US Financial Budget.
The SEC's paper clearly proposes the usage of freed transaction fees by switching from SWIFT to XRPL (estimated to be $7.5 billion) to fund the Bitcoin purchases.
The XRP Ledger could easily replace SWIFT because of blockchain technology, which enables it to deliver faster, safer, transparent, and much more efficient operations.
Blockchain technology can settle transactions within a few seconds as opposed to SWIFT which takes upto 3 days. For example, the XRP Ledger settles transactions in just 3 to 5 seconds.
Further, XRPL posts on-chain records of all its transactions, which anyone can view. All of these take place without violating the privacy of the end users.
Cost-wise, it costs just a fraction of funds used for cross-border payments. A transaction on the XRP.
The US SEC seeks at least 1 year to acquire all the necessary approvals and implement all the parts of its proposal. If given a relaxed schedule, it takes around 2 years.
Regulatory Clearance: 1 to 3 Months, Presidential Order required
XRP Testing in Government Payments: 2 to 4 Months, Treasury-backed Pilot Programme
Full Scale Financial Integration: 6 to 9 Months, Federal Reserve and OCC Mandates
Bitcoin Reserve Build Up: 9 to 12 Months
Regulatory Clearance: 3 to 6 Months, Presidential Order required
XRP Testing in Government Payments: 6 to 12 Months, Treasury-backed Pilot Programme
Full Scale Financial Integration: 12 to 24 Months, Federal Reserve and OCC Mandates
Bitcoin Reserve Build Up: 24 Months
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