Ripple's European Compliance Victory: Is XRP Trading Volume Being Drained by Stablecoins?

Ripple, the blockchain payment giant, has consecutively obtained electronic money institution licenses in the UK and Luxembourg within a week, clearing key regulatory hurdles for its expansion in Europe. These victories mark the formation of Ripple’s “European dual hub” strategy, aimed at serving the cross-border payment market worth trillions of dollars.

However, behind the glamorous compliance milestones lies a critical structural challenge for XRP holders: Ripple’s increasingly flexible product design supports settlement using either XRP or its upcoming stablecoin RLUSD. In the current trend of stablecoin-dominated payments, this compliance push may ultimately divert rather than increase actual trading demand for XRP, reducing its role from an essential to an optional tool. The market cheers the news in the short term, but long-term focus should be on the substantive pathways of value flow.

Double Strike in One Week: How Ripple Builds a Compliant European Gateway

For any crypto enterprise aiming to conquer traditional financial markets, a compliance license is a more scarce resource than technological advantage. Ripple understands this well and staged an impressive “compliance lightning war” in early 2024. On January 14, the company announced preliminary approval from the Luxembourg Financial Sector Supervisory Commission (CSSF), with prospects of obtaining an electronic money institution license. Less than a week earlier, it had confirmed approval from the UK Financial Conduct Authority (FCA).

These two licenses are not just simple numerical additions but carefully designed strategic pieces. Luxembourg, as one of the EU’s financial centers, offers a unique “passport” right, allowing licensed institutions to operate freely across all 27 EU member states. Although the UK has left the EU, its London financial market still boasts unparalleled depth and liquidity in global forex and treasury operations. Ripple President Monica Long explained this strategy clearly: the company aims to serve the UK and global markets via London, while leveraging Luxembourg to influence the entire European single market. This “dual anchor” model ensures flexibility and resilience in Europe post-Brexit and under the MiCA regulatory framework.

Obtaining licenses is just the first step; transforming them into actual business is the real test. Ripple has already made moves in this regard. As early as December last year, Swiss bank AMINA announced becoming Ripple Payments’ first European banking client, utilizing its licensed end-to-end payment solution for near real-time cross-border transfers. This case is essentially a “stress test” of Ripple’s compliance solutions before regulatory approval, also demonstrating market demand. Long emphasized that the EU’s early rollout of a comprehensive digital asset regulatory framework provides the necessary certainty for financial institutions to scale blockchain from pilot projects to commercial operations. Ripple’s goal is more than just “moving funds”; it aims to manage the end-to-end flow of value, unlock trillions of dollars of idle capital, and push traditional finance toward a digital future.

Ripple Global Compliance and Operations Key Data

Core European Layout

• UK License: FCA-approved electronic money institution and crypto asset registration
• EU Springboard: Luxembourg CSSF preliminary approval of EMI license (with EU passport validity)
• First bank client: Swiss AMINA Bank (already deploying Ripple Payments)

Global Operational Scale

• Total licenses and registrations worldwide: over 75
• Cumulative transaction volume processed: over $95 billion
• Forex market coverage: claims to reach 90% of the global daily FX market

It’s worth noting that Europe’s payment infrastructure itself is evolving rapidly. The ECB’s instant payment regulations are pushing traditional banks toward mandatory real-time settlement, subtly eroding the speed advantage that crypto once boasted. Ripple’s large-scale compliance efforts now are aimed at participating in and even leading this transformation at the intersection of accelerating digitalization and clearer regulatory frameworks, positioning itself as a “compliance tech company” rather than a “crypto rebel.”

Upgrading XRPL’s “Compliance Layer”: Opening the Garden for Institutions

Ripple’s front-line efforts in regulation are supported by simultaneous backend technological upgrades. Its core settlement layer—the XRP Ledger—is undergoing a profound evolution to meet institutional compliance needs. Ripple has consistently stated its goal to transform this decentralized ledger into a more regulated, compliant settlement layer as required by compliance departments. The centerpiece of this vision is a new feature called “Permissioned Domains.”

The essence of “Permissioned Domains” is to create “walled gardens” for institutions on the open XRPL network. This is a clever design to address the key pain point of institutional adoption of public blockchains. Traditional banks and financial institutions hesitate to use public blockchains mainly because they cannot control counterparty risk, violating fundamental compliance principles like “Know Your Customer” and anti-money laundering. Permissioned Domains allow institutions to participate in the public network while strictly limiting interactions to verified, known permissioned domains. This preserves the settlement finality and interoperability advantages of public chains while meeting private chain control needs.

RippleX, Ripple’s development arm, points out that this upgrade is a “game changer” for XRPL, as it brings institutional-level control to the public network without sacrificing the benefits of private chains. Currently, the amendment for Permissioned Domains is close to activation thresholds. Use cases are also imaginative—for example, the upcoming XRPL lending protocol could utilize permissioned domains to manage controlled lending flows.

From a business perspective, this technical upgrade is pragmatic: it opens specific payment channels previously too risky or complex for automation. Ripple executive Luke Judges cited the USD-BRL channel as an example, noting that permissioned domains can enable XRPL as a settlement track supporting this payment flow. For the large cross-border remittance markets in South America, this is an attractive prospect. Therefore, XRPL’s technical upgrade and Ripple’s licensing efforts are two complementary fronts: licenses address the legal “can we do it,” while features like permissioned domains solve the operational “how to do it compliantly,” jointly paving the way for large-scale institutional capital entry.

Emerging Concerns: Will Stablecoin RLUSD Become XRP’s “Trojan Horse”?

Market prices reacted positively to Ripple’s compliance news, with intraday gains exceeding 3%. However, for long-term investors, a more critical question has surfaced: will this European compliance push translate into structural demand for XRP, or mainly accelerate a stablecoin-led payment mode, thereby weakening XRP’s role as a necessary or primary pathway?

The answer lies in Ripple’s current product design logic. Ripple Payments is a highly flexible system that allows value transfer via two main paths: the first is the classic “XRP path,” involving raising XRP, transferring on-chain, then converting to local fiat for payment; the second is the “stablecoin path,” such as using Ripple’s planned RLUSD or other compliant stablecoins to achieve the same cross-border transfer. This flexibility is highly attractive to banks and payment companies seeking certainty and simplified accounting.

But this flexibility also creates a split narrative for XRP. The same “green light” for compliance could expand Ripple’s global distribution network, or divert settlement volume away from XRP. In highly regulated, accounting-focused markets like Europe, with clear treasury management and a preference to avoid volatility, stablecoins anchored to fiat currencies have natural advantages. AMINA Bank has already integrated RLUSD in testing, clearly indicating that a “stablecoin-first” track is in place.

In this scenario, [XRP] might evolve into a “specialist tool” or “contextual asset,” used only in specific channels where its costs are significantly lower, faster, or more liquid than stablecoin alternatives. For example, in corridors with difficult fiat conversions or shallow stablecoin markets, XRP’s fast settlement and broad coverage may still be preferred. However, in mature, highly liquid markets like Europe and North America, stablecoins are almost certain to become the default choice.

Thus, Ripple’s compliance success is a double-edged sword for XRP. It undoubtedly enhances the legitimacy and accessibility of the entire Ripple ecosystem, creating more potential use cases for XRP. But it also paves the way for competitors—stablecoins—to gain similar or even broader opportunities. Ultimately, a more likely architecture is that stablecoins will handle most of the heavy lifting in cross-border payments, while XRP fights for market share in segments where it can offer clear, measurable advantages. For investors holding XRP as a “Ripple success proxy,” understanding this subtlety is crucial.

How to Rationally View Ripple’s Success and XRP’s Value Relationship?

Ripple’s strategic evolution forces the market to reassess the investment logic of its native token XRP. The long-held simple narrative of “Ripple success equals XRP rise” needs to be replaced by a more complex framework. Investors now stand at a crossroads, requiring multi-dimensional analysis of their relationship.

First, it’s essential to distinguish between “network utility value” and “speculative premium.” XRP’s core value proposition is as an efficient, low-cost bridge asset and liquidity tool within RippleNet and related products. This value is directly related to the total cross-border payment volume settled via Ripple, especially the portion using XRP path. Any progress increasing Ripple network adoption and transaction volume supports this fundamental utility. However, historical prices often include significant speculative premiums driven by future monopoly expectations and narrative hype. The introduction of stablecoin pathways directly challenges this premium, as it implies ()https://www.gate.com/price/xrp-xrp[XRP] is not indispensable.

Second, attention should be paid to the specific design of “value capture mechanisms.” A key question is: how does Ripple profit indirectly or directly from its success to benefit XRP holders? Currently, main mechanisms include: 1. using XRP for market making and liquidity provision to increase on-chain demand; 2. promoting XRPL ecosystem development to attract independent applications and developers, thereby increasing demand for XRP as a base gas token and staking asset. Ripple’s compliance expansion and technological upgrades undoubtedly benefit the XRPL ecosystem’s prosperity, creating a broader potential use case base for XRP—even if its usage in payment products shifts.

For current strategies, investors should consider: closely monitor disclosures or third-party analyses of the actual usage ratio of “XRP path” versus “stablecoin path”; pay attention to innovative applications built on XRPL by third-party developers that do not rely on Ripple’s products—these are key to XRP’s value decoupling from a single corporate narrative; and rationally evaluate XRP’s risk-reward ratio in their portfolios, viewing it as an asset driven by specific fundamentals (network settlement volume, ecosystem activity) but also facing internal competition (from RLUSD) and external competition (other cross-border solutions).

Extended Interpretation: What is Ripple? Its Business Model and Relationship with XRP

What is Ripple?

Ripple is a US-based technology company founded in 2012, whose core mission is to revolutionize global cross-border payments using blockchain technology. Unlike protocols like Bitcoin and Ethereum, which aim to create decentralized financial systems, Ripple’s business model is more aligned with “B2B” technology providers, serving primarily banks, payment providers, and financial institutions.

Its main product lines include:

1. RippleNet: A blockchain-based global payment network connecting hundreds of financial institutions, providing fast, low-cost, traceable cross-border payments. RippleNet is a closed alliance network utilizing standards like the Interledger Protocol (ILP) developed by Ripple.
2. Ripple Payments (formerly ODL - On-Demand Liquidity): A key service on RippleNet that uses XRP as a bridge currency to solve the pre-funded accounts problem in cross-border payments, freeing up capital and increasing efficiency.
3. XRPL: The XRP Ledger, an open-source, decentralized blockchain with XRP as its native token. Ripple is a major contributor and builder of the XRPL ecosystem but does not control it. Ripple Payments uses XRPL for settlement.

The role of XRP in this ecosystem:

In the classic Ripple Payments model, XRP acts as a “bridge asset.” For example, a US company paying to Mexico can buy XRP, send it almost instantly to a partner in Mexico, and sell it for pesos to pay the recipient. The entire process can be completed within minutes at a fraction of traditional wire transfer costs. XRP’s value lies in its fast settlement (3-5 seconds), low fees, and broad exchange listing, providing an efficient liquidity source.

Controversies and regulation:

Ripple’s legal battle with the US SEC over whether XRP is an unregistered security has been a focal point in crypto regulation. In 2023, courts issued a simplified ruling favoring Ripple, stating that programmatic sales of XRP to retail investors do not constitute securities offerings. This ruling significantly eased XRP’s regulatory uncertainty and helped it regain listings on major exchanges and expand globally within compliant frameworks.

How Will the MiCA Regulatory Framework Reshape the European Crypto Market?

Ripple’s urgent license pursuit in Europe is directly related to the upcoming full implementation of the Markets in Crypto-Assets Regulation (MiCA). MiCA is the EU’s first comprehensive, unified crypto regulation, expected to influence beyond Europe and serve as a global reference. Understanding MiCA is key to understanding Ripple’s and other crypto firms’ future in Europe.

Core goals of MiCA include providing legal certainty, protecting investors, ensuring financial stability, and fostering innovation. It classifies crypto assets into categories:

1. Electronic Money Tokens: Mainly stablecoins pegged to a single fiat currency, used as a means of payment.
2. Asset-Referenced Tokens: Supported by a basket of assets (e.g., multiple fiat currencies, commodities).
3. Other Crypto Assets: Including Bitcoin, Ethereum, and others not falling into the above categories.

Strict regulation of stablecoins is a highlight. MiCA imposes rigorous reserve requirements (full, high-quality, low-risk assets), redemption rights, and issuance caps (non-Euro EMTs have lower daily trading limits in the EU). This directly impacts stablecoins like USDT, USDC operating in Europe and creates opportunities for new entrants like Ripple’s RLUSD, provided they meet MiCA standards.

Authorization regime for service providers requires all crypto asset service providers (exchanges, custodians, payment providers) operating in the EU to obtain licenses from national authorities and comply with strict operational, governance, and consumer protection rules. Ripple’s electronic money license is a key enabler for its compliant payment services.

Market implications:

• Market consolidation and specialization: High compliance costs will weed out non-compliant small projects, favoring well-funded, compliant institutions.
• Innovation by design: Projects will focus on building compliance into their design from the start—“compliance by design” becomes mainstream.
• Facilitating traditional finance entry: Clear rules reduce legal risks for banks and asset managers adopting crypto tech. MiCA effectively acts as an “invitation letter.” Ripple sees this as an opportunity—competing or collaborating with traditional financial giants within a regulated sandbox.

Therefore, Ripple’s European license pursuit can be viewed as a strategic move to secure a prime position before the official opening of the new regulatory stage under MiCA. Whether XRP or RLUSD becomes the main actor, Ripple has already secured a place in the spotlight. For the industry, Europe is transforming from a “wild west” into a well-regulated highway—speed may be limited, but accidents and uncertainties will be greatly reduced, attracting larger capital flows.