What Does SWIFT’s R3 Announcement Mean for Ripple & XRP?

The meeting between Ripple CEO Brad Garlinghouse and SWIFT CEO Gott Liebbrandt at the Paris FinTech Forum was always likely to be interesting, but few expected it to produce a bombshell of news with huge implications for both payment platforms. The news in question was an announcement that SWIFT is working with enterprise blockchain consortium R3 on a proof of concept for a system that would link SWIFT’s Global Payment Initiative (GPI) platform with R3’s blockchain-based trading platform.

The news was delivered nonchalantly by Liebbrandt as part of a longer answer to the question of whether SWIFT would be open to working together with Ripple. But the news of potential R3 and SWIFT GPI integration dominated headlines relating to the debate.

Some have seen the announcement as a direct rejection of Ripple by SWIFT in favour of a competing platform. Others have jumped on the fact that R3 uses Ripple’s XRP cryptocurrency as part of its Corda Settler payment platform to claim this as a momentous victory for Ripple.

There is a lot to unpack surrounding this announcement. The relationship between Ripple and XRP is itself complex, as a soured deal between the two entities resulted in R3 taking legal action against Ripple back in September 2017.

Ripple & R3

According to a report from Finder, Ripple and R3’s legal entanglement began with a deal that would see Ripple offer substantially discounted XRP tokens in exchange for access to some of R3’s heavyweight contacts within the banking industry. Ripple were apparently prepared to offer 5 billion XRP at 1 cent each in exchange for access to “which might have included Goldman Sachs, JP Morgan and Morgan Stanley, all of whom were part of the R3 consortium at the time the deal was inked.” The deal never came to fruition, with R3 accusing Ripple of never delivering the promised 5 billion XRP, and Ripple claiming that R3 had “entered into the contract in bad faith,” going so far to accuse R3 of “using it as a cover to steal some of Ripple’s experience in order to develop a competing product.”

Lawsuits and countersuits were launched in the wake of the collapsed agreement. Finder’s article estimates that, if we take the approximate market value of XRP as 20 cents at the time the deal was negotiated, the agreement would’ve seen Ripple give R3 $1 billion worth of XRP. A Fortune article published in January 2018 detailed the then-ongoing legal battle, with cases heard in California, Delaware, and New York. Among the accusations contained within Ripple’s counter-suit against R3 was a claim that “CEO David Rutter knew financial heavy-weights Goldman Sachs, J.P. Morgan, and Morgan Stanley were pulling out of R3.” Fortune states that the 5 billion XRP offered to R3 would amount to 10% of the total supply then held by Ripple, with a then-current market value of $12 billion.

The acrimonious legal battle between Ripple and R3 dragged on until September 2018, when a press release stated the sides had reached a confidential agreement:

“R3 HoldCo LLC, R3 LLC, Ripple Labs Inc. and XRP II, LLC announce that they have reached a settlement of all outstanding litigation between the parties. The terms of the agreement will remain confidential and both sides look forward to putting these disputes behind them.”

Both sides had clearly put those disputes behind them by December, when R3 announced XRP would be the first settlement mechanism to be used on its new Corda Settler global payments facilitator:

“The deployment of the Corda Settler and its support for XRP as the first settlement mechanism is an important step in showing how the powerful ecosystems cultivated by two of the of the world’s most influential crypto and blockchain communities can work together,” said Richard Gendal Brown, Chief Technology Officer at R3.  “While the Settler will be open to all forms of crypto and traditional assets, this demonstration with XRP is the next logical step in showing how widespread acceptance and use of digital assets to transfer value and make payments can be achieved.”

This now creates the strange situation wherein SWIFT will possibly be trailing XRP-powered payments through its integration with R3.


A CoinDesk article published after the Paris FinTech Forum announcement quotes R3 co-founder Todd McDonald’s explanation of what the integration with SWIFT will entail:

“SWIFT GPI will integrate directly to Corda Settler, the application that allows participants on the Corda blockchain to initiate and settle payment obligations via both traditional and blockchain-based rails… This will enable obligations created or represented on Corda to be settled via the large and growing SWIFT GPI network.”

But before Ripple supporters start celebrating the fact that SWIFT have finally seen the light and embraced XRP, the article adds these cautionary words from SWIFT’s chief marketing officer Luc Meurant:

“All trade platforms require tight linkages with trusted, fast and secure cross-border payments mechanisms such as GPI. While DLT-enabled trade is taking off, there is still little appetite for settlement in cryptocurrencies and a pressing need for fast and safe settlement in fiat currencies.”

The ’DLT’ in the above quote refers to ‘distributed-ledger technology’. So while SWIFT are keen to experiment with the possibilities opened up by blockchain-based trades, they are much less enthusiastic about throwing cryptocurrencies such as XRP into the mix.

This is a point which Liebbrandt expounded upon during his debate with Garlinghouse. Liebbrandt described two types of competition currently faced by SWIFT for cross-border payments: those working inside the regulated banking system, and those outside it. Liebbrandt characterized SWIFT and Ripple as being “on the same boat,” in that they were both working within the established and regulated system. He described it as being possible that SWIFT and Ripple could co-exist, giving the example of Santander, which uses both Ripple and SWIFT for payment processing. And he agreed with Garlinghouse that “the future belongs to open systems,” but they differ greatly on what exactly that means.

Ripple & SWIFT…?

In the run-up to the Paris FinTech forum, we published an in-depth piece on the competition between Ripple and SWIFT. During the debate with Garlinghouse in Paris, Liebbrandt had no trouble admitting that Ripple had forced SWIFT to innovate, leading to the creation of SWIFT’s GPI. And prior to the newly-announced integration with R3, Liebbrandt explained that SWIFT has experimented extensively with blockchain technology. However, SWIFT had concluded that it would be much more beneficial for banks to integrate other application programming interfaces (APIs) than to go all-in on blockchain:

“API is at heart of what we do with GPI. It’s here today. Banks are able to integrate it. Blockchain, we think, is further out. We’ve ran a large proof of concept with blockchain – several, I should say. 40 banks participated in one for end-to-end transfers. The largest HyperLedger demonstration outside IBM. 500 individual blockchains being run. When we evaluated that with banks, it wasn’t clear it was that much better than what we have today given migration costs.”

These ‘migration costs’ are crucial to Liebbrandt’s main arguments against Ripple – that it simply isn’t worth making the switch to blockchain when SWIFT’s GPI is already moving toward making near-instant value transfer possible.

Garlinghouse was quick to fire back that what Liebbrandt described wasn’t really an “open network”:

“Swift can talk open APIs, open networks, but it isn’t – it’s a SWIFT-controlled API. I’m complimentary of GPI accelerating… but it’s still a central database [with] a central operator. Decentralized systems, over time… are likely to win. Today, that’s not what SWIFT is.”

Garlinghouse referred throughout the debate to the future “Internet of Value,” where transferring funds is as simple and instantaneous as sending an email. He gave the example of sending funds directly from a Barclays Bank account to an M-Pesa mobile phone wallet – something completely beyond the scope of SWIFT’s GPI. He gave the analogy of SWIFT proposing an improved version of a horse and buggy, when the future belongs to Ferraris. Garlinghouse also characterized the relationship between Ripple and SWIFT in 2020 as being akin to that between Amazon and Walmart in 1997.

Liebbrandt’s retort was that XRP represents Ripple’s biggest value proposition, and banks simply aren’t prepared to use a cryptocurrency as a clearing unit due to its price volatility. Garlinghouse argued back that with SWIFT payments taking days and XRP payments clearing within seconds, SWIFT transfers are actually subject to much greater volatility due to fluctuating foreign currency rates. At present, the banks take on that volatility risk by guaranteeing the amount sent will match the amount received. With near-instant XRP-backed transfers, that volatility risk is actually completed eliminated.

Liebbrandt aimed further criticism at cryptocurrency’s lack of regulation, but Garlinghouse countered that every XRP transaction is vetted for Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance. Finally, Garlinghouse added that XRP payments greatly reduce systemic risks to banks in smaller economies, which have to use large amounts of money to prefund international transfers. This squares with what Garlinghouse said at the World Economic Forum in Davos earlier in January, when he claimed that Ripple could potentially free-up $10 trillion for the global economy.

By the end of their exchange, it was clear that Liebbrandt has no desire to work with XRP directly. He was even more direct at the Paris Economic Forum a year earlier, when he laughed at Garlinghouse’s characterization of Ripple vs SWIFT as being akin to David vs Goliath:

“[Garlinghouse] was the sixth richest man in America, wasn’t he? Briefly… Well, if I’m now facing someone who through this crypto thing has a $100 billion war chest and unlimited funding, who’s the Goliath out here?”

Through its experimental integration with R3, SWIFT may be indirectly integrating with XRP, but it seems highly unlikely that Liebbrandt would ever countenance going further. But that may be of little importance to the future of SWIFT and Ripple’s relationship, as Liebbrandt will be stepping down as SWIFT CEO in June. Whether the incumbent will be anymore receptive to working alongside Ripple remains to be seen. For now, the convoluted links between SWIFT, Ripple, and R3 are sure to fuel continued debate about the future of global finance.

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