A recent suggestion put forth to the U.S. Securities and Exchange Commission’s (SEC) newly-formed Crypto Task Force by Maximilian Staudinger argues for XRP as a “strategic financial asset” for the United States (utilizing some rather dubious mathematics and reasoning).
I’m here to inform you that XRP is not a strategic asset and that the reasoning in this suggestion is questionable at best.
In the suggestion, Staudinger asserts that $5 trillion is tied up in U.S. Nostro accounts (accounts that banks utilize for international transactions). He contends that if specific regulatory circumstances were established — including the SEC designating XRP as a payment network, the U.S. Department of Justice (DoJ) granting legal approval for banks to utilize XRP, and the Federal Reserve mandating that banks adopt XRP as a liquidity solution — then 30% of this capital ($1.5 trillion) would be liberated for the U.S. government to acquire 25 million bitcoin at $60,000 per bitcoin.
Now, let’s examine why this reasoning is flawed.
Firstly, Nostro accounts are merely bank accounts that U.S. financial institutions possess in foreign nations. I’m uncertain what kind of rationale supports these domestic banks handing over the U.S. dollars that XRP would hypothetically replace to the Federal government for these dollars to be used to purchase bitcoin on behalf of the government.
Secondly, the suggestion fails to provide specifics on how these domestic banks would procure the XRP that would take the place of the dollars. It seems only logical that they would need to purchase the XRP, resulting in XRP absorbing this $1.5 trillion, not bitcoin. Even if Ripple, the issuer of XRP, wished to simply gift these banks XRP for use, this still wouldn’t suffice, as it only possesses around $100 billion in XRP — significantly short of $1.5 trillion.
Thirdly, even if bitcoin’s value dropped to $60,000, the price would start increasing immediately as the U.S. government began buying the 25 million bitcoin.
Finally, there’s a strict limit of 21 million bitcoin (and approximately 4 million have been lost), which is a well-established fact in the Bitcoin or crypto ecosystem. Thus, it’s rather absurd to suggest that the U.S. government could acquire 25 million bitcoin. If the author were even a moderately serious individual, he might have recommended that the government purchase 15 million bitcoin at $100,000 per bitcoin (though the calculations would still not add up).
Considering how flawed the reasoning behind this proposal is, it’s challenging to regard XRP as a strategic asset. Moreover, why would the U.S. government do so when two-thirds of the supply remains in the possession of the organization that issued the asset? It doesn’t appear logical.
Bitcoin, conversely, is a globally distributed asset that many across the globe utilize as both currency and a store of value. Additionally, the Bitcoin network is managed by tens of thousands of nodes and is nearly impenetrable, due to the approximately 0.4% of the world’s energy that secures it. (The XRP network is overseen by 828 nodes and lacks security from any amount of energy.) These elements render bitcoin a logical reserve asset, which is how the U.S. government now officially categorizes it.
Therefore, I hope the SEC comprehends what I’ve articulated in this article and doesn’t invest much time even contemplating Mr. Staudinger’s suggestion.
This article is a Take. Views expressed here are solely those of the author and do not necessarily represent those of BTC Inc or Bitcoin Magazine.
