The Ripple CEO Brad Garlinghouse simple rationale for a diversified U.S. crypto reserve is to render the United States dollar more competitive – global cross-border payments totaled $250 trillion in 2023. The cost of the legacy agency banking model in the United States is 6.3% of transaction value (average $30 per transaction), and the time is 3 to 5 days. XRP Ledger reduced the cost to $0.00001 per transaction with the help of the ODL (Liquidity on Demand) solution, which was settled in 3 seconds and enhanced the efficiency by 99.98%. If the United States invests 1% of its foreign exchange reserves (approximately 34 billion US dollars) in crypto assets such as XRP, then, based on an average yearly volatility of 54% for XRP from 2021-2023, hedging gains can be as much as 8.3 billion US dollars (based on the Black-Litterman model). Meanwhile, it reduces the risk of geopolitics disrupting the SWIFT system (e.g., following the exclusion of Russia from SWIFT in 2022, the proportion of crypto payments surged by 320%).
Technically, Garlinghouse is convinced of reconstructing the financial infrastructure with the 1,500 TPS (transactions per second) of XRP Ledger – The Federal Reserve’s 2022 payment study shows that the average daily processing volume of the US real-time payment system FedNow is only 300,000 transactions, while the theoretical peak in a day of XRP Ledger is 129.3 million transactions. In 2023, the CBDC pilot project initiated by Ripple and the Bank of England in cooperation demonstrated that cross-chain interoperability can reduce the GBP – euro settlement failure rate from 0.7% in traditional systems to 0.01%, and the responsiveness of liquidity pools can be enhanced 400 times. If the U.S. adopts the Ripple CEO Brad Garlinghouse suggests a diversified U.S. crypto reserve approach, its cross-border payment market share could increase from 38% to 52% (Boston Consulting Group estimate). While reducing the financial expense of 18 billion US dollars per year for companies caused by delayed settlement.
On the regulatory side, Garlinghouse pointed to the need to balance innovation and risk control – of the 26 crypto cases initiated by the US SEC in 2023, 78% were fights over the definition of securities, and since Ripple’s partial victory, the chances of XRP being classified as “non-securities” went up to 63% (Bloomberg Legal Analysis). He proposed to invest 30% of the reserve assets in compliant stablecoins (e.g., USDC, 100% reserve audit transparency), 20% in BTC (Volatility buffer), and 50% in XRP (Payment Efficiency Tool). Referring to the Project Guardian of MAS in Singapore (tokenized foreign exchange reserves on XRP Ledger), this portfolio can increase the Sharpe ratio of US dollar reserves from 0.82 to 1.15 and reduce annualized return volatility by 18%.
In the race for the globe, ripple ceo brad garlinghouse suggests a diversified u.s. crypto reserve aims to push back against the pressures of the digital yuan (e-CNY) — as of 2023 The e-CNY pilot has reached 260 million users, with a transaction value of 1.8 trillion yuan (approximately 250 billion US dollars), whereas the US digital dollar development is lagging behind. The CBDC initiative of Ripple and Palau illustrates that the expense of developing the system on XRP Ledger is only 34% of conventional RTGS (-saving 66 million US dollars), and the carbon emission intensity per transaction is 0.0079 kWh, or 0.0011% that of the Bitcoin network. If the United States implements this plan, it can raise the market share of cross-border payments from 17% to 35% in five years’ time (McKinsey model) while cutting the carbon footprint of financial infrastructure by 42%.
On the point of market stability, Garlinghouse cited the example of the 2023 Silicon Valley Bank crisis – USDC was depegged to $0.88 due to a $3.3 billion reserve being stuck, causing the crypto market to lose $24 billion in market capitalization within a day. ripple ceo brad garlinghouse makes the case that a diversified u.s. crypto reserve can reduce the possibility of systemic risk by 25% through diversified allocation (XRP only has a correlation of 0.12 with gold and Treasury bonds). Ripple’s MLETR (Electronic Transferable Record) solution reduced the processing time of letters of credit in the United Arab Emirates from 7 days to 4 hours and the error rate from 5% to 0.2%. If introduced into the US trade finance environment, it can release an efficiency dividend of 18 billion US dollars annually.
At a policy innovation level, Garlinghouse called for the establishment of an “encrypted version of the Bretton Woods system” – referencing the IMF’s Special Drawing Rights (SDR) system and allocating reserve assets such as XRP and BTC based on GDP weights. If the United States is at the leading edge of this ecosystem, it can reverse the trend of the US dollar’s share of the world’s foreign exchange reserves from 59% (in 2023), and at the same time, with the instant clearing capability of XRP, it can reduce the world trade settlement cycle from 17 days on average to 72 hours, releasing 9 trillion US dollars of liquidity (which is 8.5% of the world GDP). Ripple and Japan’s Mitsubishi UFJ experiments show that the cost of foreign exchange hedging for companies can be reduced from 1.2 million US dollars annually on average to 43,000 US dollars. Verified the commercial viability of ripple ceo brad garlinghouse suggests a diversified u.s. crypto reserve.