Right before the European Union plans to shut the door on unlicensed crypto companies, Ripple, the company behind XRP (XRP +2.29%), was issued a key. On June 23, the Commission de Surveillance du Secteur Financier (CSSF) of Luxembourg granted Ripple preliminary approval for a Crypto Asset Service Provider (CASP) license under the EU’s new Markets in Crypto Assets (MiCA) regulation.
Ripple is now on track to facilitate payments through the XRP Ledger (XRPL) as a regulated financial infrastructure in Europe. That’s a big green flag for XRP’s future prospects this year and beyond. Here’s why.
This one permission slip grants access to a slew of the world’s richest countries
In addition to getting its preliminary crypto service provider license, Ripple also recently secured an Electronic Money Institution (EMI) license, which authorizes it to hold customer funds.
Combined, the two licenses give Ripple one of the broadest regulated footprints in crypto, as it can now market its services and financial technologies, including the XRPL, across all 30 countries of the European Economic Area, many of which are wealthy and thus have strong demand for fintech. With the application deadline approaching on July 1, only about 210 of the 1,200-plus pre-MiCA operators have converted to full CASP status. So the landscape of compliant crypto businesses is about to get a lot smaller, and Ripple will be one of the largest remaining competitors.
Image source: Getty Images.
Surprisingly, Tether’s USDT stablecoin is among the assets shut out of regulated E.U. venues. That means there is likely an opportunity for the XRPL’s native stablecoin, Ripple USD, to capture its share of the market, which could serve to generate more fees for the XRPL and perhaps attract more capital to the chain.
Ripple wins here, but does the coin?
The new license being good for Ripple, the company, is a separate issue from whether it’ll be good for XRP, the token. The license is Ripple’s; the token gains value only when activity routes through the XRPL, and even then, only at massive scale. XRP itself is used on the ledger only as a small per-transaction XRP fee burn and as a small reserve held by every XRPL account.
Today’s Change(2.29%) $0.02Current Price$1.05Key Data PointsMarket Cap$66BDay’s Range$1.02 – $1.0652wk Range$1.02 – $3.65Volume2.1B
But RLUSD now has a lane into Europe. It only needs European banks to plug into Ripple’s payments stack to begin distributing it. In the backend, that distribution will occur using the XRPL. The XRPL will thus capture a slice of that capital flow, and XRP itself will capture a tiny slice of that slice.
This development is a green flag because XRP, the XRPL, and RLUSD all gain a large new addressable market. But the returns to holders will be modest and slow to accrue. Still, it’s a new tailwind for the coin, and the value-capture mechanics for holders may be adjusted over time to boost their returns.
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