Despite Ripple’s extensive partnerships with over 300 banks and financial institutions, the XRP Ledger continues to show limited on-chain activity. This raises questions in the crypto community about the reasons for the low transaction volume.
Reasons for Limited On-Chain Activity
According to Ripple’s Chief Technology Officer, David Schwartz, one key reason is institutional hesitation. "I think there are several reasons why institutions have historically preferred to use digital assets off-chain rather than on-chain," he noted.
Additionally, he emphasized that regulatory compliance challenges, particularly around decentralized exchanges, hinder activity. "Even Ripple can’t use the XRPL DEX for payments yet because we can’t be sure a terrorist won’t provide the liquidity for payment," Schwartz added.
XRP's Volatility and Use Cases
Another common concern is whether XRP’s price volatility makes it unsuitable for enterprise payments. However, Schwartz sees it differently: "There are use cases where volatility isn’t a minus, or is even a plus." For many users, the potential for long-term upside outweighs the short-term risks.
He also explained that a bridge currency like XRP is useful because it needs to be held for use at the right moment.
Geopolitical and Jurisdictional Issues with XRP
Schwartz also addressed the issue of geopolitical trust. He mentioned that although Ripple is based in the U.S., the XRPL itself is not constrained to a single country. "It has never discriminated against any particular participant, and if it ever started to, I would hope people would stop using it," he stated.
Certain regions, such as North Korea or Cuba, are unlikely to utilize Ripple’s technology due to international sanctions and U.S. oversight.
David Schwartz highlighted that despite the extensive network of partnerships with banks, XRP Ledger has yet to become a leading on-chain payment infrastructure due to various reasons. However, with developments like permissioned domains and growing support for public networks, the shift to on-chain settlements may be accelerating.
