For Ripple Coin, MoneyGram Deal Trumps Talks Of South Korea's Crypto Ban

Once again, another Asian nation is no match for the blockchain.

South Korea's talk of banning cryptocurrency trading sent all of the top traded coins down yesterday and again on Thursday. But one major stands out today, and that's Ripple (XRP). The token tied to the digital payments startup is back trading over $2 thanks to an announced deal with Dallas-based MoneyGram. MoneyGram shares rose over 6% on the news.

MoneyGram will allow their customers to send and complete cross-border payments with the XRP token instead of fiat currencies like the dollar. MoneyGram will use the company's xRapid, Ripple’s on-demand liquidity product, Ripple said today. The system permits real-time foreign exchange settlement through ripple coin, "which gives financial institutions the ability to unlock liquidity and access multiple corridors with one pre-funded originating account."

Ripple has been rising from a small, relatively unknown cryptocurrency to a top-three behind heavyweights bitcoin and ether. Major venture capital firms and banks have invested in the company, including Google Ventures and Standard Chartered bank.

This week, word that the South Korean government would ban trading sent ripples through the crypto market. South Korea, Japan and China account for the lion's share of trading on cryptocurrency exchanges. Demand for cryptocurrency has grown so fast, top exchanges like Bitstamp and Okex are closed to new accounts. The Korean government still seems noncommittal to the idea of the outright ban of exchanges, something China did late last year. Cryptocurrencies fever is rampant in South Korea. Demand tends to push prices of many tokens nearly 30% higher than they are on exchanges in other countries, leading to arbitrage purchases by risk-taking locals.
The country’s Justice Minister Park Sang-ki said the decision to curb trading is multi-departmental, including members of the Finance Ministry and securities regulators. “There are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” Sang-Ki was quoted saying in Reuters.

Asia headlines have been a mixed blessing for MoneyGram. The company made headlines this month following a failed China acquisition.
The company's attempt to sell to China's Ant Financial, a unit of Alibaba, the e-commerce giant founded by billionaire Jack Ma, was banned just last week by the U.S. government. MoneyGram said it was unable to obtain the required approval for the transaction from the Committee on Foreign Investment in the United States, or CFIUS.

"The geopolitical environment has changed considerably since we first announced the proposed transaction with Ant Financial nearly a year ago,” MoneyGram CEO Alex Holmes said in a statement. “Despite our best efforts to work cooperatively with the U.S. government, it has now become clear that CFIUS will not approve this merger. We are disappointed in the termination of this compelling transaction,” he said.

MoneyGram is a popular service in emerging markets like China and Brazil, where expats often use it to repatriate cash to family members back home or to pay bills. They can now do so in XRP.

This week, two Goldman Sachs economists issued a report titled "Bitcoin as Money" arguing that cryptocurrencies, led by bitcoin, were more apt to be used as a source of payment in weak currency nations where dollars are scarce.

Ripple rose to fame after it announced a pilot program signed between two South Korean banks and a consortium of 61 Japanese banks. It's been on a tear ever since. South Korea pulled a rug out from under it this week, but the MoneyGram news kept it from falling further.

That might not hold.

Seoul is preparing a bill which will ban all cryptocurrencies from trading on local exchanges. It is unclear how this would impact Ripple's pilot project. The company was unavailable for immediate comment.

"Banning cryptocurrencies altogether would be difficult given that the country is one of the biggest markets in the world, especially for bitcoin and ethereum," says Forbes contributor Naeem Aslam, chief market strategist for ThinkMarkets in London. "Keep in mind that this is not the first time that the regulators have gone after the cryptocurrency market. During this week alone, we have seen two headlines emerging from South Korea aimed at bitcoin. There is no doubt that the demand for bitcoin in South Korea is massive and some elements of the public's behavior — when it comes to trading the cryptocurrencies — aren’t far from gambling habits."

Traders should not read too much into the South Korean situation, Aslam wrote in a note to clients on Thursday. Once the bill is drafted, it would require a backing of 297 members of the National Assembly, a process which could take months or even years.

"Ripple's growth over the past year has been stellar and it has acquired multiple institutional customers who are seriously considering using it for cross-border settlements," says Abhishek Pitti, founder of Nucleus.Vision, a visual data company using blockchain technology based in Palo Alto and Hyderabad, India. Mumbai-based Reliance Capital serves as both an advisor and early investor to the company. Draper Ventures founder Tim Draper is also a lead investor in Pitti's company. "Ripple has shown that they can facilitate double-digit million dollars worth of transactions in seconds, at a fraction of the cost of a bitcoin transaction," he says.

Pitti thinks XRP will escape South Korea's crypto ban.

"I don't think South Korea is banning cryptocurrencies altogether," he says. "They are clamping down on unregulated exchanges so that shouldn't effect ripple because their primary users are regulated financial institutions."