What is Ripple Labs?

The potential of blockchain technology to streamline cross-border payments and settlements was recognized early on, as it addressed inefficiencies like the need for less liquid currencies to be converted to major currencies like USD or EUR.

Ripple Labs, a leading digital financial services company, pioneered the use of distributed ledger technology to tackle these challenges, capitalizing on the speed and peer-to-peer capabilities of the blockchain to create a better payment system.

History of Ripple Labs

Ripple was well-placed to become an early mover since the company was initially established in 2004, pre-dating even the 2009 Bitcoin genesis. It was founded by developer Ryan Fugger, who aimed to create a decentralized monetary system called RipplePay.

In 2012, Fugger would hand over the reins of the project to Jed McCaleb, the founder of Mt.Gox exchange, and Chris Larsen, an entrepreneur. McCaleb and Larsen had been developing their own concept for a digital currency in parallel. They launched the XRP Ledger (XRPL) in 2012.

McCaleb and Larsen briefly renamed the company OpenCoin, although they would eventually settle on the name Ripple Labs.

Since 2012, Ripple Labs has raised around $300 million in funding over 14 rounds. As of mid-2024, the company was valued above $11 billion and employs around 900 people.

XRP Lawsuit and separation of Ripple and XRPL

The Ripple Labs corporate entity was responsible for the setup and operation of the open-source XRP Ledger (XRPL). Since 2020, responsibility has been delegated to the XRPL Foundation, which is described as “an independent and nonprofit entity with a mission to accelerate the development and adoption of the decentralized XRP Ledger.”

Ripple Labs continues to operate as a for-profit company providing various payment solutions to enterprise clients. The separation is at least partly explained by a lawsuit brought by the SEC against Ripple in 2020, alleging that it sold XRP as an unregistered security.

The charges, which were brought against Chris Larsen and the current CEO, Brad Garlinghouse, claim that Ripple had never filed the appropriate registration documents for the XRP sale. In 2023, the ruling court made a landmark decision that XRP was only a security when traded with institutional investors.

The SEC subsequently dropped charges against Larsen and Garlinghouse but continued its pursuit of $2 billion worth of remedies from Ripple Labs. As of July 2024, the case continues.

Ripple Payment Solutions

Ripple Labs offers several different types of financial services solutions to its enterprise clients.

Cross-border payments

Ripple Labs leverages the XRPL and XRP cryptocurrency to provide a cross-border payment solution to enterprises and financial institutions. It uses XRP as a settlement currency, enabling real-time payments on a 24/7 basis with fast settlement.

Banks associated with Ripple’s cross-border payment network include Santander, Brazil’s largest retail bank, Itaú Unibanco, and several others. In 2024, Ripple Labs partnered with Clear Junction to enable instant payouts in British pounds and euros for its cross-border payments clients.

Institutional custody

Following the 2023 acquisition of digital asset custodian Metaco, Ripple Labs offers digital asset custodial services to banks, exchanges, neobanks, and fintech companies. It uses an API-first model to enable connectivity to multiple trading venues and custodians for flexible deployment of digital assets when needed. Shortly after the acquisition, it also emerged that HSBC would be launching its tokenized assets custodial services in partnership with Metaco.

In June 2024, the company announced the further acquisition of Standard Custody as part of its plans to roll out a US dollar-backed stablecoin since the firm already holds a regulatory license from the New York Department of Financial Services.

Digital asset liquidity

Ripple Labs offers digital asset liquidity via its Liquidity Hub, enabling businesses to access liquidity pools and trade features using a single API.

The service leverages the liquidity already available in XRP via the cross-border payments network, allowing firms to make international payments without having to pre-fund their accounts or set up banking relationships in each country where payments are processed. It’s been used by fintech firms, including Tranglo, an Asian payments hub, and Finci, a European-based international money transfer provider.

Central Bank Digital Currencies (CBDCs)

Ripple Labs also provides a modular CBDC platform, enabling central banks to issue and operate digital currencies. The platform also includes wallet and ledger functionality. The government of Palau is using it to issue a national digital currency.

Ripple Labs essentials

• Ripple Labs is the company that developed the XRP Ledger and offers several different types of fintech solutions to enterprise clients.
• In 2020, Ripple Labs formally delegated responsibility for the operation of the XRP Ledger to the XRPL Foundation following the XRP lawsuit, where the SEC alleged that the sale of XRP was unlawful.
• Ripple Labs’ services include cross-border payment and liquidity solutions based on the XRP Ledger, institutional custodial services, and a CBDC platform.