International Inc. signed on to run a
pilot program testing XRP, a digital currency created by San Francisco startup
Ripple, in its payments network, the companies said Thursday.
Dallas-based company agreed to test XRP as a tool for reducing money-transfer
costs and settlement times. A MoneyGram spokeswoman said the open-ended pilot
wouldn’t involve customers’ money since it is limited to internal processes. It
is the first time the two companies have worked together, she added.
Shares of MoneyGram
and the value of XRP rallied after the announcement. MoneyGram closed 0.5%
higher on the day, at $12.18 a share. XRP jumped 24% in morning trading but was
down about 1.6% on the day at 5 p.m. EST.
Ripple develops software, based on the
concepts underlying the digital currency bitcoin,
that is aimed at creating networks for banks and financial institutions that
would allow for faster and cheaper interbank trading and settlement.
Ripple has about 100
banks, including UBS Group AG , Banco
Santander SA and Banco Bilbao Vizcaya
Argentaria SA, signed on as customers but has been working to sign up
remittance companies like MoneyGram as well. Ripple Chief Executive Brad
Garlinghouse said in a tweet earlier this month that three of the five largest
money-transfer companies would begin using XRP this year.
MoneyGram, with 350,000 agents around the world, is the
second-largest money-transfer company by total face value of remittances,
behind only Western Union . In
2017, the company agreed to sell itself to Chinese financial-technology giant
Ant Financial Services Group, but that deal fell apart last week after failing to win the approval
of U.S. officials.
Startups in the cryptocurrency space
have been trying for years to develop products for the remittance market, with
only limited success. As a digital asset, cryptocurrencies generally can be
transferred virtually anywhere in the world with a smartphone or computer.
Remittance costs vary
by service and countries, but they can be high. The cost to send $200 from a
bank in the U.S. to a bank in Brazil via MoneyGram, for instance, can bring a
fee of almost 9%, or about $18, according to data from the
Bitcoin-related startups have found,
though, that the logistics of building new markets around the world and
introducing a new technology at the same time are considerable.
Having MoneyGram experimenting with XRP is a significant development for
Ripple, too. The firm created XRP in 2012—the currency was originally called
ripple as well—and created 99 billion units. But over the years, it has
experimented with different blockchain-based programs, and some of those don’t
require XRP at all.
Only one institution, Mexico-based
money-transfer service Cuallix has signed up to specifically use XRP for
settling cross-border trades. That has led some people to question the
valuation that the market has been putting on XRP, which has risen sharply amid
a broad rally for bitcoin and other digital currencies.
XRP has been volatile, rising from
about 25 cents in early December to as high as $3.81 last week. It was at $1.98
in late New York trading Thursday, according to coinmarketcap.com.
Ripple has sold 38 billion XRP into the
secondary market and holds the remaining 61 billion as an asset on its balance
here for the original article from The Wall Street Journal.