Ripple’s XRP down along with crypto market ahead of CBDCs?
The prospective competition from central bank digital currencies may come into sharp focus, said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
It is never fully understood what fundamentals are really driving the markets. The cryptocurrency market is down this week, following an almost established narrative in which prices tumble every month since January.
China’s government crackdown on Bitcoin has put pressure on the market, with June’s spot volumes plummeting by 42.7% and total derivative volumes decreasing 40.7%.
There are also fears that Grayscale’s Bitcoin Trust conversion into an ETF could trigger a downward move in Bitcoin and the digital asset market in general.
The European Central Bank, however, has just given the green light for the digital euro project. The prospective competition from central bank digital currencies may come into sharp focus, said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“The edge away from crypto wallets comes as speculation surges about the impact of central banks around the world launching rival digital currencies. The chair of the Federal Reserve Jerome Powell said the introduction of CBDCs would undermine the case for cryptocurrencies and stable coins.
“His comments in a special US congress appearance came as the European Central Bank revealed it is forging ahead with an investigation into the benefits of a digital euro which would complement cash”, Ms. Streeter continued, adding “the revolution in the global payments system is firmly on central banks’ radar given how critical its smooth running is to financial stability.”
While many investors could see CBDCs as a threat to the value of their crypto holdings, a number of firms within the space have been proposing their distributed ledger systems as the ideal technology to set up a viable central bank digital currency.
Ripple is among those blockchain companies. It has developed a private version of the XRP Ledger so that central banks are able to comply with their system and legal frameworks. It is also known that Ripple’s XRP has been considered by EU member states, namely France, as the basis for the digital euro.
Brazil has also had meetings with Ripple executives, but its most recent announced guideline for a digital real makes no mention of the firm.
It has been questioned, however, if the firm is really an option for the development of a CBDC while the SEC v. Ripple lawsuit lingers.
The lawsuit, which is now expected to end by early 2022, would preferably (in the eyes of Ripple Labs) come to a close with a summary judgment on the fair notice defense. A settlement could eventually mean damages for the XRP market.
A key hearing will go down today at 3:00 p.m. ET.