In a bold declaration at the Frankfurt Stock Exchange, Oliver Michel, CEO of Tokentus Investment AG—a prominent German Web3 venture capital firm—asserted that XRP is on track to become the world’s reserve currency. His insights shed light on how blockchain technology, particularly the XRP Ledger (XRPL) and Ripple’s On-Demand Liquidity (ODL), could revolutionize global finance by addressing long-standing inefficiencies in cross-border payments.
Michel emphasized XRP’s unique role in enhancing liquidity for foreign exchange reserves, facilitating international transactions, and supporting a wide range of global economic activities. This functional versatility, he argues, makes XRP a strong contender to serve as a universal bridge currency in the evolving digital economy.
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Solving Cross-Border Transaction Challenges
During an interview with Der Aktionar, Michel illustrated the real-world friction involved in traditional international money transfers—particularly between Germany and the United States.
Currently, when someone in Germany sends euros to a recipient in the U.S., the process typically involves multiple intermediaries. Banks convert euros to dollars through correspondent banking networks, often relying on SWIFT. This multi-step conversion is not only slow—taking up to several business days—but also costly due to fees at each stage and unfavorable exchange rates.
Michel pointed out that Ripple’s strategic development of XRP directly targets these inefficiencies. Instead of moving fiat through a chain of banks, XRP acts as a digital bridge asset. In his example:
- The sender’s bank converts euros into XRP instantly and at minimal cost.
- The XRP is transmitted across the XRP Ledger in seconds.
- Upon arrival, the recipient’s bank or financial institution converts the XRP into U.S. dollars.
This method bypasses traditional intermediaries, drastically reducing settlement time and transaction costs. It's not just theoretical—Ripple has already implemented ODL solutions with partners across emerging markets like Mexico, the Philippines, and Indonesia, demonstrating tangible improvements in speed and cost-efficiency.
XRP Ledger and On-Demand Liquidity: The Backbone of Global Settlement
Michel also highlighted the growing importance of the XRP Ledger (XRPL) and Ripple’s On-Demand Liquidity (ODL) solution, especially as central banks around the world advance their central bank digital currency (CBDC) initiatives.
As nations explore or pilot their own digital currencies, a critical challenge emerges: interoperability. How can different CBDCs transact seamlessly across borders? Michel believes Ripple’s bridge technology offers a compelling answer.
Ripple’s network enables frictionless value transfer between different currencies—fiat or digital—by using XRP as an on-demand liquidity tool. This eliminates the need for pre-funded nostro accounts, which traditionally tie up large amounts of capital in foreign banks just to facilitate international payments.
For central banks, adopting such a system could mean:
- Faster cross-border settlements
- Reduced liquidity costs
- Greater financial inclusion for underbanked regions
- Enhanced monetary policy execution in a digital era
With these advantages, Michel envisions Ripple playing a pivotal role in connecting national digital currencies, positioning XRP as the neutral, efficient intermediary—the “reserve bridge currency” of the future.
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Why XRP Stands Out Among Digital Assets
While thousands of cryptocurrencies exist, Michel argues that few offer the combination of speed, scalability, and regulatory clarity that XRP provides.
- Speed: Transactions settle in 3–5 seconds on the XRP Ledger.
- Scalability: XRPL can handle up to 1,500 transactions per second, far exceeding Bitcoin and Ethereum in throughput.
- Sustainability: The ledger uses negligible energy compared to proof-of-work blockchains.
- Regulatory Engagement: Ripple has been actively working with regulators worldwide, setting it apart from many crypto firms that operate in legal gray areas.
These attributes make XRP not just a speculative asset, but a functional tool for institutional finance. As more banks and payment providers seek efficient alternatives to legacy systems, XRP’s utility becomes increasingly relevant.
Frequently Asked Questions (FAQ)
Q: What is a reserve currency, and why does it matter?
A: A reserve currency is held by central banks and used globally for international trade and debt settlements. The U.S. dollar currently dominates this role. A shift to a digital reserve currency like XRP could modernize global finance by enabling faster, cheaper, and more transparent transactions.
Q: Can XRP really replace the U.S. dollar as the world’s reserve currency?
A: While full replacement is unlikely in the short term, Michel suggests XRP could become a bridge currency—facilitating seamless exchanges between different national currencies and CBDCs without replacing any single fiat currency outright.
Q: Is XRP legal and compliant with financial regulations?
A: Ripple has faced regulatory scrutiny, notably from the SEC, but continues to engage constructively with global regulators. It operates licensed entities in several jurisdictions and emphasizes compliance as a core part of its business model.
Q: How does On-Demand Liquidity (ODL) reduce costs for banks?
A: ODL eliminates the need for pre-funding accounts in foreign countries. Instead of tying up millions in idle reserves abroad, banks use XRP to source liquidity instantly, reducing capital requirements and increasing operational efficiency.
Q: What real-world use cases exist for XRP today?
A: Financial institutions in over 30 countries use RippleNet and ODL for remittances and cross-border payments. Examples include MoneyGram (previously partnered), SBI Remit in Japan, and various fintechs in Latin America and Southeast Asia.
Q: Could central banks adopt XRP for CBDC interoperability?
A: While direct adoption may be limited due to decentralization, central banks could leverage Ripple’s technology and protocols—potentially integrating XRP as a settlement layer between sovereign digital currencies.
The Road Ahead for XRP
Michel remains optimistic about XRP’s trajectory. He believes that with continued innovation, regulatory clarity, and expanding institutional adoption, XRP is uniquely positioned to become the backbone of a new global financial infrastructure.
As digital transformation accelerates across economies, the demand for fast, secure, and low-cost settlement mechanisms will only grow. In this context, XRP isn’t just another cryptocurrency—it’s a foundational piece of the future financial system.
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While challenges remain—including market volatility and evolving regulations—the momentum behind XRP and Ripple’s ecosystem suggests a future where borders matter less in finance. Whether or not it becomes the world’s official reserve currency, its role as a bridge in the new digital economy appears increasingly undeniable.
Core Keywords: XRP, reserve currency, Ripple, On-Demand Liquidity, XRP Ledger, cross-border payments, CBDC, digital asset