What Is Ripple?

By Matthew DiLallo – Updated Nov 20, 2023 at 2:38 PM

Key Points

Ripple Labs uses XRP to make fast cross-border payments.
The SEC alleges Ripple sold XRP as an unregistered security, which has delayed its IPO.
Investors can't buy Ripple stock yet but can explore alternatives like Coinbase or PayPal.

Ripple Labs is the financial technology company behind the popular cryptocurrency XRP (XRP +1.27%), sometimes called Ripple. The company uses XRP as a bridge currency to help facilitate cross-border payments and foreign exchange transactions.

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Wooden blocks that spell out XRP, which is the Ripple cryptocurrency. — Image source: Getty Images.

Ripple got into legal trouble with the Securities and Exchange Commission (SEC), which alleged the company was selling its XRP cryptocurrency to investors as an unregistered security a few years ago. Ripple claims XRP is a commodity and not a security.

Those legal troubles are currently holding Ripple Labs back from completing its initial public offering (IPO). The company plans to go public eventually once it puts its legal issues in the rearview mirror.

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IPO

IPO (Initial Public Offering) is the first sale of stock by a private company to the public, making it a publicly traded entity.

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Fintech

Fintech, short for financial technology, are a variety of software platforms, apps, and hardware solutions that leverage tech to make financial processes easier, more efficient and more profitable.

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Shareholder

An individual or entity that owns a portion of a company's stock, entitling them to a share of its profits and assets.

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A gold and silver Ripple coin. — Image source: Getty Images.

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Exchange-Traded Fund (ETF)

An exchange-traded fund, or ETF, allows investors to buy many stocks or bonds at once.

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The bottom line on Ripple

Ripple is working to blaze new trails through its XRP cryptocurrency to help facilitate cross-border and foreign exchange transactions that could enable the company to generate lots of fees in the future. However, the SEC's lawsuit over selling XRP is a major overhang delaying its IPO.

Once that uncertainty clears, the company could go public. That would spur more widespread use of XRP and drive up the value of Ripple and its cryptocurrency.

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About the Author

Matt DiLallo has been a contributing Motley Fool stock market analyst specializing in covering dividend-paying companies, particularly in the energy and REIT sectors, since 2012. He also covers pre-IPO companies, ETFs, and other investing topics. He holds an MBA from Liberty University.

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Matthew DiLallo has positions in Block and PayPal and has the following options: short December 2023 $67.50 puts on PayPal and short February 2024 $67.50 calls on PayPal. The Motley Fool has positions in and recommends Bitcoin, Block, Coinbase Global, Ethereum, PayPal, and XRP. The Motley Fool recommends the following options: short December 2023 $67.50 puts on PayPal. The Motley Fool has a disclosure policy.