Alex Carchidi, The Motley Fool
5 min read
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XRP's regulatory risks are set to decline a lot.
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Its ledger is getting a significant new source of traffic, thanks to an acquisition.
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Another major holder will soon begin holding the coin.
XRP (CRYPTO: XRP) seems to keep having doors opened for it lately. Each time there's a new positive catalyst, it paves the way for the coin to continue to rise over the coming years.
There are three fairly recent developments that make XRP worth buying and holding for at least three years. Let's take a look at each and put them into context.
The Securities and Exchange Commission (SEC) has been in a legal battle with Ripple, the company that develops XRP, since late 2020. The issue in contention was whether Ripple broke securities laws by offering XRP without filing the relevant paperwork with regulators. That battle is now winding down, and by the looks of it, XRP has won decisively.
The SEC and Ripple jointly filed a motion on May 8, seeking to settle the SEC's lawsuit for a total of $50 million, down from a prior agreed-upon sum of $125 million. The motion is now being considered by a judge. If the judge assents, Ripple will get its $75 million back from the previously planned settlement.
More importantly, it'll be free to continue issuing and developing XRP without the fear of regulators shutting down its operations and rendering the coin worthless. As such, perhaps the single biggest risk that the coin was exposed to is now -- nearly -- in the rearview mirror, which is another reason to buy it.
On April 8, Ripple paid around $1.2 billion to acquire a company called Hidden Road, which is a type of business called a prime broker. Prime brokers offer services to other financial companies, enabling them to borrow funds and execute their trades, among other things.
Now, because Ripple owns Hidden Road, certain stablecoins on XRP's ledger can be used as collateral for institutional investors like hedge funds that use Hidden Road's platform. Critically, those stablecoins can now be used as collateral for borrowing in both the cryptocurrency sector and the traditional financial sector, meaning that they're almost like a financial bridge between the two. Another benefit is that all the post-trade activities that Hidden Road offers to its clients will be moved to XRP's ledger, generating significant volume for the chain, as well as a larger supply of on-chain capital.
The sum of these benefits is that XRP will now be undeniably involved in the financial plumbing of a system that institutional investors actually use to accomplish their objectives. That's extra marketing for them to adopt XRP to save on their costs, and the new capital stored on the chain will likely increase its value as well. Over time, the price effect could be substantial.
