It’s no secret that cryptocurrencies have undergone a dramatic rebrand. No longer perceived as a detriment to banks and governments, cryptocurrencies are now being hailed as "digital assets". As more and more financial intuitions become comfortable with the blockchain technology on which they are based, they are openly discussing a future when the financial tools are just another part of the industry. Now, a dozen banks have announced the completion of an initiative during which they tested a potential application of a digital asset. Revealed today, 12 member banks of blockchain consortium R3CEV have completed a series of trials using distributed ledger startup Ripple ‘s native asset, XRP. The trials, conducted in an environment set up at R3’s lab, were designed to show how banks could save money and create new revenue streams by using XRP to provide liquidity to their many bank accounts around the world. Ripple head of global sales Nilesh Dusane said the effort revealed not only how banks could minimize delays getting funds to their customers, but save money by harnessing the technology. Dusane told CoinDesk: "Everything comes down to return on investment. This project was aimed to show the ROI of reducing costs around liquidity by around 60%." Playing the ‘nostro’ margins In short, instead of making banks redundant , this implementation was designed to show how the use of cryptocurrency could potentially make them money. That’s because for banks to do business around the world, they open accounts called nostro accounts that must be filled with local currency. Ripple argues this results in a waste of capital that the trials were designed to showcase. First, Ripple contends that value is lost because currency that must be held in the account is capital that could be invested elsewhere – and adding liquidity to these […]
