In light of stringent Basel III requirements, Ripple’s XRP may emerge as a key tool for banks seeking to improve liquidity.
Pressure on Banks: Basel III
Basel III, finalized by the Basel Committee in 2017 and set for full implementation by 2025, is designed to strengthen the global banking system. This set of regulations requires banks to maintain larger amounts of high-quality liquid assets, forcing them to tie up significant amounts of capital that could be more effectively deployed. Under current regulations, banks must hold capital equal to 100% of the value of crypto assets like XRP, increasing the costs of holding them.
Ripple's Instant Settlements: A Capital Efficiency Tool
Ripple offers a solution in the form of instant settlements, using XRP as a bridge asset. This helps eliminate the need for pre-funded nostro accounts and significantly shortens settlement times from days to seconds. By expediting such processes, banks can free up liquidity and potentially reduce the amount of capital they are required to hold. A report by the Bank for International Settlements highlighted that faster settlements could lead to significantly lower capital requirements as funds are no longer tied up in lengthy transactions.
Ripple's Regulatory Strategy
Despite criticism that banks will not adopt XRP due to regulatory uncertainty, Ripple is actively working to dismantle this narrative. In July 2025, the company applied to the U.S. Office of the Comptroller of the Currency for a national banking charter, which could align its operations with federal banking regulations and facilitate the integration of XRP into traditional finance.
XRP is becoming a strategic instrument that helps banks address real problems caused by tightening capital requirements, making it increasingly valuable in today's financial environment.
