Ripple Exec on Palau Stablecoin Trial on XRP Ledger, SEC Case Ruling

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. The country of Palau will be leveraging Ripple's CBD C platform. And it's been a little over two weeks since a judge ruled that the sale of Ripple's XRP tokens on exchanges and through algorithms did not constitute investment contracts. Joining us now to discuss is Ripple's Vice President of Central Bank Engagements and CBD CS James Wallace, James. Nice to see you again. Hey Jen. Yeah, great to see you again. Hi Lawrence. Hey, hello. All right. We're going to discuss what's happening in Palau in just a moment, but we need to get your reaction on ripple, scoring a partial win here. How are you feeling about it? How's the rest of the company reacting? I think we're all feeling great. Um You know, we think it's a major victory for, not just for ripple but also for the industry. You know, we've been looking for clarity in the US for a long time. I think the big, you know, the real big takeaway is that, you know, the judge has ruled that, you know, XRP uh in itself is not a security and that is a huge, um, huge breakthrough, a huge victory. So, yeah, we're feeling great. Thank you. But it doesn't seem like the story is over quite yet. So, I mean, like after you're done high fiving Brad Garling House in the hallways, what exactly is going on? Like, what's the, what's the battle plan if you're going to be, uh, you know, if maybe fighting this out for a while as long as you have this 32 sec involved, uh you know, how do you approach? And since you're focused on CBD CS, how do you approach other central banks knowing that you have this sort of conflict with one of the largest, with, well, with basically the largest economy in the world. Yeah. Well, a couple of thoughts on that Lawrence, firstly, you know, I'm not going to comment on the ongoing strategy. We have, you know, much bigger brains and the legal team working on, on that aspect. But I think one important factor here is that, you know, going right back to the start of the, when the, when the, the case was brought, um that was almost exactly the same time that we started out on our CBD C uh projects. And, you know, it was, it was kind of a strange time. So we just had this lawsuit, we also had COVID kicking in. And um despite all those things, you know, we were able to get this business off the ground. Um, I would tell you that outside of the US, you know, the SEC case and, you know, had almost no impact on our ability to get conversations and projects going with central banks. Um, yeah, I know here in the US, we focus a lot on the US. You know, that's what you'd expect but the reality is that the rest of the world does not see things the same way. I think it's, it's been clear for a while that countries like the UK and Switzerland and Japan have, have been very clear that XRP is not our security. So anyway, moving on to the CBC side, it's not really been a, a, an impediment, you know, since we started, you know, 2.5 years ago on this project, we, we've announced five different countries that are working with us. We have a, you know, a similar number that are not announced and then we have, um, you know, 20 plus other, uh active uh discussions under way. So, um, you know, from my point of view, it's great that we've got this victory. Uh, it doesn't dramatically change, you know, the, the work that I'm working on with the central banks around the world. That's interesting. So when you're talking to these different central banks around the world and working with regulators, the case hasn't really come up. They, they, they always ask the question and, you know, what's your point on it and say, well, this is an, you know, us specific situation hasn't impacted our business in other markets and then they move on. I mean, I don't think we've had any, we've had no countries, you know, say we don't want to talk to you because of it. So, yeah, it's a bit of a red herring when it comes to other markets. All right, let's turn to Palau. So the country consists of 340 islands or actually it's in the Pacific Ocean and is running a trial of a stable coin linked to the US dollar talk to us uh about launching this program. Yeah, thanks. So this is like one of my favorite things to talk about. So happy to be on talking about it. Um Yeah, Palau is, as you mentioned, is um in the Pacific, it's a relatively small population dispersed across, you know, many islands we started talking to Palau um probably a couple of years ago. Um We were talking, we were talking with the president about his sort of strategy for the economy, uh both domestically and internationally. Uh And then this concept of a of a national currency came up. So to give you a bit of context, Palau is a um independent Republic. It uses the US dollar as its official currency. It has no central bank, right? So, so we started thinking through this, we thought, ok, well, we can do a US dollar stable coin um which could be launched as a palau um uh branded currency if you like. Um So these thoughts, you know, matured over the following sort of 12 months or so. And then here we are right. We, we uh we're so happy to, to got this project live with real transactions. Um There's a lot of um things have developed over those, over those, those uh those months, we have the basic first use cases are really a retail uh stable coin. So in this pilot that, you know, a number of government employees receive the PSC, the stable coin and they're able to go and buy things in a select number of, of the large retailers in the country. And then the retailers can then redeem that back into fiat in their bank if they, if they choose to do that. So I have to ask you about their monetary policy if you will, which is basically the US, right? It's, it's run by the fed. Essentially, they, they don't control their interest rates, essentially, they don't control uh anything in their economy. And to be sure it's a country of 18,000 people which is about the size of a, you know, a small town in the United States, a small city in the United States, a definitely town. Um But what happens here is, do you, how is it going to be run? Is it, is it fully backed stable coin? Is it an algorithm is it, is, it suggested because you're not the, you're dealing with the US, but you're not dealing with the US. And does it open the door for the Palau dollar if you will to become a sort of backdoor way to trade, uh, to have a US D stable coin without the regulation of the United States. So I think the regulation here is a very important topic. And, you know, throughout this process, we were working with the uh the F IC in Palau as long as belong with the government. So this is, you know, ultimately the government, you know, sets the policies and the rules within Palau and they do that in the context of the relationship with the US. So, um you know, I think over time, you know, the the the use cases will probably grow around this stable coin, but in a very controlled way, right, that, you know, the um the intention here is to help improve the economy domestically and then also help uh think about cross border payments. But I don't, I don't see an environment where this is um uh let out into the wild, you know, uh uh it's a fully backed stable coin, 1 to 1 held against us, dollars, held uh with the government uh very tightly controlled KYC process, et cetera, et cetera. So this is, we're trying to set this up as a sort of poster child for a regulated stable coin, you know, that, that, that can exist. You get all the benefits of the stable coin. Um I can't foresee a scenario where the Palau government will allow, allow it to be used, you know, to anyone that comes and use it for any use case that would, you know, destroy the value. Yeah, but nonetheless, II, I mean, we have the US coming out with regulation with stable coins, it looks like they're probably going to be something that can only be issued, let's say by us banks. But here you are uh issuing a basically a US backed stable coin in a country that uses the A US backed currency. IIE the US currency itself. What happens after the US regulates stable coins in the unit in the United States. What do you do on your end uh afterwards when you're dealing with Palau, an independent Republic but nonetheless tied to the US dollar. Yeah, I don't want to second guess what the regulations are going to be, right? I think the uh you know, we'll obviously have to the government at the end of the day is our client, right? We are providing the technology here. Um And just to give you a little bit more context on that, you know, this platform that we, we launched recently. Uh Jen, I think we covered it a little bit on, on our discussion is a, a platform for issuing uh either CBD CS or stable coins. You can issue either on the, on a private ledger or on the public XRP ledger. And this is, this is the platform that we've deployed in Palau and that we're deploying in other countries. Uh you know, at the end of the day, we are not the operator of that. We are the technology provider, you know, our clients, you know, are the operators and you know, they obviously um work on the regulatory and, and, and uh legal aspects of the, of the currencies. You know, we provide some thoughts on that, but at the end of the day, that's not our role in these, in these projects. I wanna talk about Palau's Palau's very big cash economy. We played a video uh at the beginning of this segment, we saw cash being brought in on planes, talk to me about setting up the infrastructure and changing sentiment. How are we going to get people to use the stable coin there when everyone's used to you in cash? I know it's a very different country but in Nigeria, they're having the exact same problem with getting people to switch from cash to the CBD C. Yeah. So I think the, I think it's a, it's an iterative process. I mean, you know, we're keeping an eye on all the other projects out there with, you know, with retail CBD C. Um I mean, just to give you an example though in Palau, the way it typically works, people get paid on a Friday and then they line literally line up around the street to get their cash out, right? Because it, you know, they, they um the use of the cash, you know, is what's accepted at all the stores, it's what they use to pay each other. Um So the, the, the design point on this, on this stable coin is, you know, to, to alleviate that requirement. So whilst this first phase is, you know, retail, so spending, buying things at the store, obviously, you know, P to P payments is gonna be a big part of it. There's a culture in, in Palau of people lending friends and family money and then getting paid back. So there's a potentially like a defy lending protocol that could be brought in there. Um So I think that the, the number of use cases, you know, as we roll out will be massive and just basic things like sending money to someone that's on a different island, right? I mean, today you literally would need to get in a boat and go from A to B versus with this new model, you just, it's one click on your, on your mobile phone. So it's a pretty compelling use case uh in Palau which is very cash, cash heavy. The last thing I'd say is offline payments, which is uh emerging as one of the, you know, top requirements globally for retail. Um you know, Palau has, you know, not the best sort of um infrastructure in terms of mobile network. So, offline payments is gonna be uh a big part of the, of the follow on phase around allowing transactions to happen without, without a healthy internet connection or being available. All right, James, we are going to have to leave it there. It's always a pleasure having you on the show. Great, great to be on. Thank you. That was Ripples, Vice President of Central Bank Engagements and CBD, CS James Wallace.