Blockchain payments firm Ripple, which is known for using digital currency XRP, has acquired a 40% stake in Malaysian cross-border payment startup Tranglo to gear up for its expansion in Southeast Asia, the firm announced on its website on March 30. The investment took place even as Ripple has an ongoing legal fight with the Securities and Exchange Commission (SEC) in the United States.
Although it is unclear whether the acquisition is going to be realized in cash, equity, or via cryptocurrency, the partnership allows Ripple to capture burgeoning demand of cross-border remittance in the region and expand the reach of its On-Demand Liquidity (ODL) product, which uses XRP as a medium of exchange to facilitate cross-border money transfers.
“This is done by connecting a respective remittance service provider like MoneyGram with a respective American Exchange like Bitstamp, which can then transfer XRP to a crypto exchange in another country, and then be withdrawn to a remittance service provider in Thailand,” Sanjay Popli, CEO of Cryptomind, a crypto consulting and investment firm in Thailand, explained to KrASIA.
Tranglo has been a customer of Ripple’s financial network RippleNet for years, so the partnership is open to “further expansion,” Brooks Entwistle, Ripple’s managing director of Southeast Asia, said to KrASIA.
With an extensive payment network in more than 100 countries and offices in Singapore, Jakarta, Dubai, and London, Tranglo’s steady reach will add fuel to Ripple’s ambitions in the region. The blockchain payment firm’s transactions in Southeast Asia increased tenfold in 2020.
Tranglo, which was founded in 2008, also secured a partnership last year with Alipay and WeChat Pay’s Hong Kong service, enabling users to transfer money back to Indonesia and the Philippines. As of September 2020, Tranglo has processed USD 6.91 billion worldwide, according to the company’s website.
“This [partnership with Tranglo] allows Ripple to strengthen its foothold in the cross-border payments industry in Asia, where there are many countries that suffer from a lack of liquidity and very large spreads in their respective currency markets,” Popli said.
The SEC sued Ripple last December, alleging the firm raised over USD 1.3 billion through “an unregistered, ongoing digital asset securities offering.” The heart of the debate lies in whether XRP is a security or digital currency. The lawsuit has made waves in the trading market, and an array of crypto exchanges, like Coinbase and Binance, have suspended trades and deposits of XRP.
However, XRP trading has been unimpeded in Asia as regulators in countries like Singapore and Thailand have already classified XRP as “a digital asset and not a security,” according to Popli. “As such, XRP is available to trade in more or less every cryptocurrency exchange in Asia, and the SEC lawsuit has little to no effect as they are not in its jurisdiction.”
Still, Popli believes that the main drawback of XRP as a currency is the relationship between Ripple and XRP. “Bitcoin and cryptocurrencies, as their primary purpose, provide decentralization, and while doing so, eliminate the middleman. However, with Ripple and its founders owning a large majority of the supply of XRP, it’s hard to argue that XRP is sufficiently decentralized,” he said.
“With that said, XRP’s technology is much more progressive than that of Bitcoin and Ethereum, making it the most efficient and most environmentally friendly crypto of the lot,” Popli emphasized.
This echoes the sanguine outlook of Entwistle, who recently joined Ripple, having previously worked as Uber’s chief business officer, to lead and scale the operations in one of the most crucial regions in the firm’s financial network.
“Despite the SEC lawsuit, we continue to see a significant uptake in business globally and have signed over 20 customers—all of whom are based outside the US,” Entwistle told KrASIA. “In 2020, the number of deals signed more than doubled year-on-year, and Southeast Asia, again being the fastest-growing region, experienced a tenfold year-on-year increase in RippleNet transactions.
“We are also focused on continuing the strong momentum with existing customers, like Siam Commercial Bank (SCB), BKK Forex, and iRemit. SCB, for instance, completed over half a million transactions on RippleNet in 2020, a 300% growth for inbound remittance volume and 600% outbound remittance growth year-on-year.
“The Asia Pacific is a key region for us, and this partnership will help us expand, starting with Southeast Asia,” Entwistle said.