The Japanese market is being specifically targeted by Ripple, as seen from their partnership with SBI Holdings and the launch of SBI’s Virtual Currencies trading platform with XRP as an exclusive at launch.
slinuxuzer on XRP Chat Forums claims to have a theory that explains Ripple’s “very specific strategic reason” for entering the Japanese market. This is illustrated in his post on the forums, wherein he starts by establishing some basic facts about the Foreign Exchange [Forex] market.
The Forex market is one of the biggest markets in the world, with the global market transferring upwards of $5 trillion every day. This includes both the interbank and over-the-counter markets, which includes spot trading, forward trading, futures and many others. The part of the market that deals in Japanese Yen [JPY] has a share of about 21%, which translates to 950,000 billion every day. It is the third biggest currency being traded in the market, after USD and EUR.
slin makes the point that forex markets are subject to low regulation, with profit margins for brokers being razor thin. Moreover, forex transactions usually take about 2 days to complete, with some corridors finishing it in one day.
SBI Group is one of Japan’s biggest banking consortiums that represents about 80% of all deposits done in Japan. As Brad Garlinghouse, the CEO of Ripple, has stated, Japan’s inter-country payment rails are not up to the task, Ripple’s partnership with SBI is said to be in the pursuit of leapfrogging payment rails. However, SBI also operates a Forex division with over 1 million traders. Their most recent report mentions an alliance with MoneyGram and also references their partnership with Ripple, stating:
“Money transfer services between SBI Remit and The Siam Commercial Bank Public Company Limited, the largest private bank in Thailand, makes use of the next generation settlements platform (Ripple Solution) from Ripple of the U.S., to provide international remittance services founded on distributed ledger technology, with plans to employ virtual currencies in settlements.”
It was also mentioned that they are interested in creating a synergy between their Forex, Securities and Cryptocurrency businesses. Slinux believes that this synergy is indicative of Ripple’s plan “from the beginning” to target Japanese forex markets. He also made predictions as to the changes that this could bring to the price of the XRP token.
XRP capturing 1% of the Japanese Forex market would result in a $10 billion volume made in trades every day, which represents “one small piece, of one corridor, of one use case”. Comparing this against the circulating supply of the token, which is close to 20 billion, this will cause a “significant price increase”, says slin.
Forex traders are also incentivized to use XRP to decrease settlement times of transactions, which would in turn increase profit margins in an already competitive business. Moreover, with the use of xRapid, capital in the form of nostro and vostro accounts would be freed up for use elsewhere.