For decades, international payments have been routed through the SWIFT network, which is a messaging system that connects thousands of banks. SWIFT transactions can take days, sometimes weeks, because of intermediary banks, currency conversions, and messaging delays. The main users, banks, need to carry liquidity buffers to cover the risk of those issues. This means that using SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunication, comes with a capital burden for banks.
XRP (XRP -0.68%) is a cryptocurrency designed for nothing flashier than moving value from A to B almost instantly and for almost nothing in fees. Banks wrestling with faster-payments mandates and cross-border fee pressure now have a tool that settles transactions in the time it takes to blink, so long as they're willing to abandon SWIFT. Here's why some of those banks and other financial companies are starting to consider XRP as a core reserve they might keep for decades rather than merely as a cryptocurrency investment to hold on the balance sheet.
It's a lot faster and cheaper than the status quo
On the XRP ledger (known as XRPL), a transfer finalizes in roughly three to five seconds, with typical network fees of less than 0.001 XRP, or about a tenth of a cent at recent prices. For the sake of comparison, consider that SWIFT's own progress report touts a "dramatic" improvement to a 24-hour average for cross-border settlement last year, down from 96 hours in 2019.
Why does that transaction time and cost gap matter to banks when it comes to choosing a technology to use?
If you're a bank, capital that's trapped in transit is capital that isn't earning a yield. Every hour shaved off transaction settlement frees up capital that can be redeployed, thereby enabling the bank to generate more earnings than it would otherwise. Thus, there's a strong financial incentive here for banks to switch, and little that keeps them tied to the legacy solution except for inertia.
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Furthermore, XRP's fee structure is predictable. SWIFT's message charges, foreign exchange spreads, and flat fees can be on the order of $50 per transfer. Typically, those exchange fees are billed as a percentage of the transfer amount, with 1% being a common take, so costs add up quickly for players that need to transact frequently and in large sums. With XRP, costs stay microscopic regardless of notional transaction size, and there is no currency being exchanged, so there are no exchange fees at all.
That reliability underpins the token's appeal as a utility reserve rather than a speculative investment. Once adopted, if it's anything like SWIFT, banks will be loath to transition to something else unless the benefits of doing so are very compelling.
Compliance matters too
The speed of a solution alone has probably never sold a big bank's chief compliance officer on adopting a new technology. What moves the needle is control and traceability.
XRP's ledger natively bakes a slew of regulatory compliance features directly into the protocol. Asset issuers, including those with key assets like stablecoins, can freeze individual trust lines, enact a global freeze, or enable deposit authorization so an account only accepts funds it has vetted. These features let banks satisfy know-your-customer (KYC) and anti-money-laundering (AML) obligations without incorporating external smart contract code, which is a tremendous headache on many other chains, particularly Ethereum.
As a result of XRP's compliance features and potential to cut costs, real-world pilots of financial businesses and organizations trialing XRP are piling up. Bhutan's central bank began a central bank digital currency (CBDC) sandbox on XRP's tech three years ago, looking to extend financial inclusion across its mountainous villages. More recently, Dubai green-lit a property tokenization platform that records deeds on XRPL, targeting $16 billion in real estate. Each project requires the ledger to prove it can handle regulated assets at scale, which is progress that risk officers and bank executives watch far more closely than investors typically do.
If those trials mature into production systems, banks holding XRP as an operational reserve gain a second benefit of optionality. The same tokens that are useful for making large international payments can also pay ledger fees for tokenized bonds or be used for trading other tokenized financial instruments. That versatility hedges against the risk that today's fast payment rails become tomorrow's legacy drag in the way that SWIFT is.
Thus, the durability of XRP as an asset is starting to look more persuasive than ever.
XRP's price can be volatile, yet the direction of travel toward faster payments, programmable compliance, and institutional custody is hard to miss.
For investors, that means the thesis behind buying and holding XRP today hinges less on a meme-driven price spike and more on the quiet decisions banks make to incorporate it over the next decade. Ripple, the company that issues XRP, is highly motivated to ensure that banks keep adopting the coin for their back-end use.
If XRP becomes the solution for tokenized deposits, CBDCs, and cross-border wholesale flows, demand from institutions with no intention of selling could easily anchor the coin's long-term value. And so far, the evidence is that things are moving in that direction.
