Blockchain for Banking News

After SEC lawsuit, Moneygram suspends Ripple use despite prior wait-and-see approach

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Yesterday as part of its financial results, money transfer company MoneyGram  said it was suspending use of Ripple‘s platform. In December, after the U.S. SEC’s lawsuit against Ripple that alleged XRP is a security, MoneyGram said it would take a wait-and-see approach but continue to use the platform. So it seems to have changed its tune in the interim.

Back in 2019, MoneyGram and Ripple entered into a strategic partnership in which Ripple would make $50 million of funds available for MoneyGram to use (presumably XRP) in exchange for an equity interest in the listed company. Moneygram used Ripple’s On Demand Liquidity (ODL) solution for four currencies. 

When an institution initiates a payment, the original currency is first converted into XRP by a digital asset exchange in the original country, say dollars to XRP. Almost immediately, the XRP is converted into the destination currency, for example, XRP to Canadian dollars.

Yesterday’s MoneyGram statement read: “Due to the uncertainty concerning their ongoing litigation with the SEC, the Company has suspended trading on Ripple’s platform. In the first quarter of 2020, the Company realized a net expense benefit of $12.1 million from Ripple market development fees.” 

The previous December statement indicated a more wait-and-see approach. “The Company has not currently been notified or been made aware of any negative impact to its commercial agreement with Ripple but will continue to monitor for any potential impact as developments in the lawsuit evolve,” it said in December. 

“MoneyGram has had a commercial agreement with Ripple since June 2019; this agreement represents the use of Ripple’s foreign exchange (FX) blockchain trading platform (ODL) for the purchase or sale of four currencies. MoneyGram has continued to utilize its other traditional FX trading counterparties throughout the term of the agreement with Ripple, and is not dependent on the Ripple platform to accomplish its FX trading needs.”

Yesterday Ripple responded. “We signed a multi-year contract in 2019 with MoneyGram, which is still in place and is not limited to their use of ODL. Together we are actively leveraging and exploring alternative use cases.”

It continued, “We look forward to finding a path forward with MoneyGram and have confidence that there will be more regulatory clarity in the U.S. 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.” 

Meanwhile, since the SEC lawsuit, numerous cryptocurrency exchanges such as Coinbase and Kraken have delisted XRP or restricted use to non- U.S. customers. XRP was never listed on the Gemini exchange despite other lower capitalized currencies supported by the exchange. 

This prompted one XRP fan to object with a response from Gemini co-founder Winkelovoss.