The role of XRP in the U.S. digital asset reserve raises questions about the utility of the token

Ripple's XRP, the third largest cryptocurrency by market capitalization, has gained nationwide recognition after President Donald Trump mentioned it as a "valuable asset" alongside BTC, ETH, SOL, and ADA as part of the US strategic crypto reserve plan.

Trump's executive order on March 6 has established a new framework for altcoins — Digital Asset Reserves managed by the Treasury Department.

Although there are still many divergent opinions in the crypto community about whether XRP is truly valuable as suggested by President Trump, a closer look at the utility of the altcoin is necessary.

The potential role of XRP in banking

Launched in 2012 by Ripple Labs, XRP Ledger (XRPL) is designed for interbank transactions. Initially, it provided three solutions for businesses: xRapid, xCurrent, and xVia, all of which were later rebranded as RippleNet.

XCurrent is a real-time messaging and payment service between banks, xVia is a payment interface that allows financial institutions to send payments via RippleNet, and xRapid, currently a part of On-Demand Liquidity (ODL), enables cross-border transactions.

Only ODL actually uses XRP; other services allow banks to use RippleNet without having to hold the token. This means that banks adopting Ripple's technology do not always drive the price of XRP.

Some of the world's largest banks have used xCurrent and xVia, including American Express, Santander, Bank of America, and UBS. There is less data on entities using the ODL service provided by XRP. Known adopters include SBI Remit, a major money transfer service provider in Japan, and Tranglo, a leading money transfer company in Southeast Asia.

The role of XRP in Web3

XRP is also used as a type of gas token. However, unlike the Ethereum network, where fees are paid to validators, a small amount of XRP is burned as an anti-spam mechanism.

The role of XRP in Web3 is quite small. Unlike Ethereum, Ripple does not support complex smart contracts or DApps. It only provides basic Web3 functionality, such as token issuance mechanism and NFT support according to the XLS-20 standard, introduced in 2022.

The Web3 XRPL ecosystem is small in scale. According to DefiLlama, its DeFi sector only holds 80 million USD total value locked (TVL). According to Xrpl.to, XRPL tokens have a combined market capitalization of 468 million USD. Most of them are DEX tokens SOLO and meme coin XRPM, as well as wrapped BTC and stablecoin.

To date, XRPL's Web3 field is still a niche market, being quite far behind truly smart contract platforms like Ethereum and Solana.

Source: DefiLlama## Experts debate the role of XRP in strategic reserve funds

For a long time, Ripple Labs has advocated for equal treatment of cryptocurrencies, with CEO Brad Garlinghouse reiterating this on January 27th.

*"We are living in a multi-chain world and I support a level playing field instead of one token competing against other tokens. If government-backed digital asset reserves are created, I believe it must represent the entire industry, not just a single token (whether it's BTC, XRP, or anything else)."

However, according to analyst Willy Woo, not all types of cryptocurrencies serve the same purpose. The main role of Bitcoin is to become a "politically neutral asset like gold." Meanwhile, the purpose of XRP is still unclear, but few in the crypto space believe that it could qualify to become an independent form of currency.

The main reason is due to one of the most uncomfortable aspects of Ripple, its high level of control. Unlike Bitcoin or Ethereum, Ripple does not rely on miners or staked tokens to secure the network. Instead, it uses a Unique Node List, a group of trusted validators responsible for approving transactions. While this helps optimize speed and efficiency, it raises concerns about censorship, corruption, and security risks.

Bitcoin supporter and Casa co-founder Jameson Lopp did not hesitate to discuss the potential of XRP:

*Bitcoin, then Crypto, then Ripple. The company clearly wants to provide support for CBDC. They always focus on serving banks. Very few projects are as contrary to Bitcoin as that.

The long-standing competition between Bitcoiners and Ripple enthusiasts has become more intense, especially after Ripple co-founder Chris Larsen collaborated with Greenpeace to sponsor a campaign against Bitcoin.

Contributing to the debate, expert Jameson Lopp compared the XRP Ledger (XRPL) to central bank digital currencies (CBDC), emphasizing its 'open' nature. His remarks reflect the crypto community's belief that XRP operates more like a banking tool than a decentralized cryptocurrency.

Although the XRPL blockchain is widely used in banking, the utility of XRP remains a concern. This is highlighted by the fact that about 55% of the 100 billion coins mined initially are still held by Ripple Labs. This concentration raises concerns about market manipulation and the long-term stability of the project.

You can check the price of XRP here.

Disclaimer: This article is for informational purposes only and is not investment advice. Investors should do their own research before making decisions. We are not responsible for your investment decisions.

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Viet Cuong

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