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Ripple’s Claims Regarding Nostro and Vostro Accounts Could be Wrong

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Ripple, one of the most popular cryptocurrency-related companies in the market has been trying to help financial institutions and banks to process cross-border payments in a faster and cheaper way. With one of the latest products released by the firm, xRapid, the intention is to use the XRP digital asset to reduce even further the costs of sending transactions to different countries.

One of the reasons that Ripple gives for banks to start embracing the XRP virtual currency is due to the fact that they can source liquidity on-demand. Ripple also says that financial institutions will not have to depend on costly Nostro and Vostro accounts located around the world.

However, Frances Coppola, a Senior Contributor for Forbes, explains that there is no such thing as ‘Dorman Funds’ in banking. According to the author of the article, these accounts are transaction accounts that most of the people call “checking” accounts.

On the matter, she wrote:

“‘Nostro’ means ‘my account with you’: ‘vostro means ‘your account with me.’ For every nostro at one bank, there is an equivalent vostro at another bank.”

She puts the example of an American bank that has to make a payment in Euros to another European bank. In this way, the American institution opens a Euro account at the European bank, having in this way a Vostro account that can be used to deposit Euro. The account must hold enough money to meet forthcoming payment obligations.

The article says that these bank accounts are also used to make a lot of money from interest payments on Vostro accounts. Thus, there is an incentive to have large balances on these accounts. However, there is a point to mark related to the fact that interest rates are close to zero.

Banks should always have the funds to cover the obligations for the upcoming 30 days predicting how much funds they will need. Banks can combine reports with spot FX deals or just use FX derivatives to set up future trading steam.

According to the article, the number of funds located in Vostro and Nostro accounts is higher than ever. A report released by McKinsey says that in 2015, Nostro balances around the world reached $27 trillion. The reason why Nostro balances are so high is due to the fact that transnational payments are growing.

Ripple claims that the funds stored in Nostro and Vostro accounts are not doing anything. Although they are locked up, they will be used to make payments in the future. That means that the funds cannot be used by the bank, but instead, they are going to be used to pay someone else.

The author asks the question of whether using XRP to source liquidity on-demand can eliminate large balances in Nostro and Vostro accounts. What Mrs. Coppola explains is that the same amount of money that was going to be used to fund a currency account in another bank will be used to buy the XRP and pay the other institution.

Using XRP for these large transactions would allow banks to use their own currency rather than foreign currency. Additionally, regulators would require the institution to hold liquid assets to cover these payments 30 days in advance as well.

Another thing that the author explains is that banks use Nostro accounts because they receive the most advantageous FX rate. That means that they will be funding Nostro accounts well in advance of a specific payment. Additionally, this money can be lent to short-term wholesale markets or used to buy liquid interest-bearing securities in a specific currency.

She went on explaining that banks will be losing their ability to control their own FX exposure. About it, Coppola explained:

“Rather than the bank choosing when to convert from dollars to Euros, and at what rate XRP hub would do it automatically when the payment was made, and the effective USDEUR exchange rate would be determined by the USDXRP and EURXRP cross rates at that time.”

In the example she provided, she says that the USDEUR is the most liquid FX market in the world. Why would banks use two low-liquidity rates rather than the world’s premier currency pair?

Another thing she talked about is the large sums of XRP that the company currently holds. She mentioned that the price of XRP is not fully market-determined when there is a dominant player rationing the supply. Moreover, she said that the transactions would also take a long time to be processed. Due to the fact that the firms would have to use exchanges, the transaction is not complete until the funds can be withdrawn from the exchange. In many cases, these withdrawal requests can take several days or even weeks.

Finally, Coppola shows that international payments take around 2 or 3 days to be processed. However, the final settlement is instant within the Continuous Linked Settlement (CLS) system.

She concludes saying that using XRP would not eliminate the real problems related to risk-averse banks. The major use case related to XRP is in providing payments around the world in countries that could be shut out of correspondent banking networks. In sum, for Frances Coppola,

“Ripple is trying to solve a problem that does not exist.”

 

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Ripple (XRP/USD) weekly forecast on February 18 — 24, 2019

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Cryptocurrency Ripple (XRP/USD) is trading at 0.2985. Cryptocurrency quotes are trading below the moving average with a period of 55. This indicates a bearish trend for Ripple. At the moment, cryptocurrency quotes are moving near the middle border of the Bollinger Bands indicator.

Ripple (XRP/USD) weekly forecast on February 18 — 24, 2019

As part of the forecast Ripple course is expected to test the level of 0.3210. Where should we expect an attempt to continue the fall of XRP/USD and the further development of the downward trend. The purpose of this movement is the area near the level of 0.2350. The conservative Ripple sales area is located near the upper border of the Bollinger Bands indicator at 0.3250.

Ripple (XRP/USD) weekly forecast on February 18 — 24, 2019

Cancellation of the option to continue the decline of the Ripple rate will be the breakdown of the upper border of the Bollinger Bands indicator. As well as a moving average with a period of 55 and closing quotations of the pair above the 0.3520 area. This will indicate a change in the current trend in favor of the bullish for XRP/USD. In case of a breakdown of the lower border of the Bollinger Bands indicator bands, one should expect an acceleration of the fall of the cryptocurrency.

Ripple (XRP/USD) weekly forecast on February 18 — 24, 2019 implies a test level of 0.3210. Further, it is expected to continue falling to the area below the level of 0.2350. The conservative area for selling Ripple is located area of 0.3250. The cancellation of the option of falling cryptocurrency will be the breakdown of the level of 0.3520. In this case, we can expect continued growth.

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Ripple forecast and analysis XRP/USD for 2019

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Ripple XRP/USD quotes are trading at 0.3071 and continue to move in the ascending channel. At the moment, we should expect an attempt to continue the fall and a test of the support level near the area of ​​0.1500. Further, the continued growth of cryptocurrency in the region above the level of 8.0000.

Ripple forecast and analysis XRP/USD for 2019

In favor of raising the XRP/USD quotes, a test of the rising trend line on the relative strength index (RSI) will be made. As well as a rebound from the lower boundary of the rising channel. Cancellation of the growth rate of Ripple cryptocurrency in 2019 will be the fall and close of quotes below the level of 0.1000. This will indicate a breakdown of the lower boundary of the channel and the continuation of the fall of XRP/USD to the area below the level of 0.0250. With the breakdown of the upper boundary of the descending channel and closing above the level of 0.9000, we should expect confirmation of the development of growth in Ripple.

Ripple forecast and analysis XRP/USD for 2019

Ripple forecast and analysis XRP/USD for 2019 implies an attempt to test the support level near the area of ​​0.1500. Where can we expect to continue the growth of cryptocurrency with a potential target at the level of 8.0000. An additional signal in favor of raising Ripple will be a test of the trend line on the relative strength index (RSI). Cancellation of the growth option quotes will fall and the breakdown of the area of ​​0.1000. In this case, we should expect the continuation of the development of the downward trend in digital currency with a target below 0.0250.

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Crypto Visa Card Now Supports XRP, Tron, Bitcoin Cash, Litecoin, EOS, Binance Coin and Dash

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The mobile crypto app Spend just added support for XRP. The addition gives users the ability to store the digital asset as well as spend it using the platform’s Visa debit card.

Users can instantly convert their XRP to fiat and load it onto the card, which is accepted at Visa’s 40+ million locations worldwide.

Spend supports a total of 180 countries and is now available in the US.

The company has been adding cryptocurrencies to its platform at a rapid rate. This month alone, it added support for XRP, Tron, EOS, Binance Coin, Dash, Litecoin and Bitcoin Cash.

The Spend app is currently available on iOS. It was also available on Android, but the company pulled it from the Google Play store on Friday to address performance issues and create a more seamless experience for users.

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