This price is notably still over 10% under the amount that Ripple paid per share.
— Rob “Crypto Bobby” Paone (@crypto_bobby) June 17, 2019
Ripple Under Threat from Facebook’s Crypto
Ripple’s latest partnership comes as pundits have argued that Facebook’s crypto, slated to be a low-cost & widely-adopted stablecoin, will put XRP at risk of extinction. Charlie Shrem, the founder of the now-defunct Bitinstant and a crypto entrepreneur, wrote the following on Twitter:
Facebook is launching their global crypto coin called “Libra”. What’s interesting is they are offering companies to pay $10m to become “validators”. If anything, it renders Ripple useless 😂.
Due to the uncertainty concerning their ongoing litigation with the SEC, the Company has suspended trading on Ripple’s platform.”
In a statement to Finextra, Ripple says it continues to work with Moneygram to explore new use cases beyond ODL.
“We look forward to finding a path forward with MoneyGram and have confidence that there will be more regulatory clarity in the US for the use of digital assets and blockchain technology at the end of this lawsuit – both of which MoneyGram has commented on publicly in the past about the benefits they have witnessed firsthand for their business.
“As we’ve said before, the lawsuit against Ripple has needlessly muddied the waters and introduced more uncertainty in the market for exchanges, market makers, traders and businesses who want to employ this technology.
Due to the ongoing legal dispute between Ripple and the SEC, MoneyGram has suspended the use of XRP. Ripple has a stake in MoneyGram and the financial services provider was considered the primary user of XRP.
Securities and Exchange Commission’s (SEC) multibillion-dollar lawsuit against Ripple continues to draw circles: Now MoneyGram has also said goodbye to any use of Ripple’s cryptocurrency XRP for the time being. MoneyGram made this known in its latest quarterly report, explicitly citing the legal dispute between the SEC and Ripple as the reason.
Further MoneyGram writes, one expects due to the development for the current quarter also no income from so-called “fees for market development” in XRP.
Just recently, MoneyGram reported that they had created a new record when it came to online payments over the holiday season.
During the time period between December 1 and December 25, all affiliated MoneyGram platforms reported transaction growth of more than 70 percent on a year on year basis.
It said it has a multi-year contract with MoneyGram that extends beyond the use of XRP.
Ripple lacks public support for XRP
Ripple is now saying in the direction of the SEC that their actions are unnecessarily unsettling the crypto industry, which is why some market participants are reacting conservatively. In fact, all leading crypto exchanges in the U.S. have also suspended trading XRP.
Ripple CEO Brad Garlinghouse had called on the crypto industry to show solidarity in the duel with the SEC. However, this request apparently faded into the void.
Meanwhile, the price curve of XRP is holding surprisingly stable at around $0.50 and has halfway digested the slump due to the SEC lawsuit. Conversely, this means that there are still greater hopes in the overall market that the SEC and Ripple will settle out of court over XRP.
The company has nearly $900 million in total debt, according to its most recent financial statements.
For Ripple, the deal gives it a chance to prove its blockchain technology can bring down the time and cost involved in moving money across borders. The company has been testing its approach with MoneyGram since early 2018.
“By matching this new, yet unproven market for digital currency with an existing money transfer service, it only helps to enable liquidity and also serves to further validate the viability of this currency,” commented Ronald Chakler, American Portfolios senior managing director.
“Coincidentally, Facebook just announced their own foray into this arena with Libra to be used within their platform,” Chakler added.
Ripple Labs and its lead executives in violation of federal securities laws.
SEC lawsuit makes XRP unpopular with exchanges
Since the SEC’s lawsuit against Ripple, many cryptocurrency exchanges have also moved to delist or halt XRP trading on their platforms, to avoid legal complications. Even those that have not done so have warned that they may eventually be forced to follow suit, as liquidity on partner exchanges for XRP drops and platforms where XRP can be traded becomes limited.
The move from many crypto platforms to delist XRP has not discouraged the firm, however, as it previously revealed that more than 90% of RippleNet customers were situated outside of the US.
Currently, XRP has managed to break the $0.50 level once again, despite plunging drastically after the SEC announced it was suing Ripple.
Monday that it “is not planning for any benefit from Ripple market development fees in the first quarter” of 2021, a huge contrast from when MoneyGram generated $12.1 million in market development fees in last year’s Q1.
It further explained:
“Due to the uncertainty concerning their ongoing litigation with the SEC, the Company has suspended trading on Ripple’s platform.”
All payment incentives from Ripple to MoneyGram for using XRP are listed as “market development fees,” which is essentially monetary compensation for providing liquidity to Ripple’s On-Demand Liquidity Network.
In 2018, MoneyGram figured among one of the hugest firms to publicly announce that it was piloting Ripple’s XRP cryptocurrency in its remittance services.
However, the use of XRP by MoneyGram has been temporarily paused given the ongoing legal battle between Ripple Labs and the U.S.
Ripple purchased over 5,000,000 shares at $4 a share, amounting to an initial investment of $30 million and an ownership share of 10%. This implies a valuation of $300 million, which is, according to The Block, down from the $1.2 billion proposed by China’s Ant Financial (Alibaba-affiliated) in 2017.
MoneyGram retains the right to request for up to $20 million in extra investment from Ripple in the coming two years.
Both XRP & MGI Surge
As a result of this partnership, which Ripple advocates argue is beneficial for both them and MoneyGram, both XRP and the stock of the money transfer firm have exploded. XRP is up 4.35%, beating Bitcoin’s sub-1% gain.
And MoneyGram’s public shares, which trade under the ticker MGI, rallied by 150% during Monday’s after-hours session to $3.68.
Through such payments, MoneyGram had last usually earned the equivalent of around 10 million US dollars.
The step of MoneyGram is so piquant for Ripple and XRP because Ripple had bought into the financial services provider in June 2019 with the stated goal of thus strengthening the acceptance of XRP as a bridge currency in international financial transactions. When the SEC’s lawsuit became public, MoneyGram had commented more cautiously.
It was not directly affected by the lawsuit and had never used XRP in business with end customers anyway. By now completely turning away from XRP, Ripple loses MoneyGram as a reference partner for the time being.
Narrow-lipped Ripple now put on a press release, in which the “temporary” decision of MoneyGram is emphasized.
Gram to use its on-demand liquidity service, with the money transfer outfit seeing a “net expense benefit” of $12.1 million from Ripple market development fees in the first quarter of 2020.
However, late last year the SEC filed a regulatory lawsuit against Ripple Labs Inc. and two of its executives, alleging that they “raised over $1.3 billion through an unregistered, ongoing digital asset securities offering”.
The complaint mentions the MoneyGram arrangement, although not the company by name, saying: “The Money Transmitter became yet another conduit for Ripple’s unregistered XRP sales into the market, with Ripple receiving the added benefit that it could tout its inorganic XRP ‘use’ and trading volume for XRP.”
Reporting its fourth quarter results, MoneyGram now says: “[T]he Company is not planning for any benefit from Ripple market development fees in the first quarter.
Gram chairman and CEO. “As the payments industry evolves, we are focused on continuing to improve our platform and utilizing the best technology as part of our overall settlement process.”
“Through our partnership with Ripple, we will also have the opportunity to further enhance our operations and streamline our global liquidity management,” Holmes added. “Since our initial partnership announced in January 2018, we have gotten to know Ripple and are looking forward to further leveraging the strengths of both of our businesses.”
Currently, MoneyGram relies on traditional foreign exchange markets to meet its settlement obligations, which require advance purchases of most currencies.
“We are very pleased with the terms of the Ripple investment which supports the company with permanent capital and additional liquidity,” said MoneyGram chief financial officer LarryAngelilli.