The term "Muggle" is from a fictional series of books centering around a young wizard named Harry Potter.

Some younger readers have probably read these J. K. Rowling books as children.   In her fictional universe, there are two types of people in the world:  Muggles and Wizards.   Unsurprisingly, every child reading that series wishes they were a wizard, because of the magical and entertaining world that opens up to those gifted enough to grasp it.  

We can easily apply this literary metaphor to the cryptoverse, even now in 2019.  

There are two types of people worldwide;  those that have already had their own 'light-bulb' moment and now recognize the full importance of what blockchain technology is, and what it could mean for the democratization of personal finance, and those that 'don't get it,' and are looking at the new market from the sidelines.  

Perhaps they've been frightened by the ominous statements made by traditional financial icons such as Warren Buffet or Jamie Dimon.  

The vast majority of the world exists outside of crypto, and has not taken the step of purchasing or owning cryptocurrency.   And perhaps we should be thankful for that, for the time being, anyway.   It seems like, even in 2019, we're hearing about trouble with centralized exchanges where secret keys are lost or misplaced, and high-profile hacks still happen.   The industry hasn't really figured out how to make crypto friendly to own for the mainstream investor.  

Most of us are torn between wanting to simplify things for the average investor, and advocating that owners remove their crypto-assets from centralized exchanges.   Some of us are distrustful of centralized exchanges that don't seem to actually be purchasing any underlying crypto, but instead allow their customers to 'make bets' using derivatives.  

We want crypto to be friendly, but we also know that trading contracts for difference (CFDs) is not what crypto is all about.  I won't name specific exchanges where we've had these suspicions, but you won't have to look hard to find which ones I'm talking about.  

So how do we make crypto friendly, but ensure that the demand for crypto-assets is correctly translated to the overall market?

The answer lies in making custody of crypto:

  • Convenient
  • Safe
  • Transparent
  • Interoperable with Traditional Finance

And the most important one to most of us that are already 'into' crypto is "transparency."   We need to make certain that when our friends and relatives (some of whom are not technically proficient) purchase crypto on a centralized exchange, that their crypto is actually theirs and that they have access to their own secret keys - even if they don't understand what these are.  

Purchases need to be identifiable on the blockchain, and should be settled in a timely manner by exchanges.  

We also need a custody solution for ordinary people that is easy and convenient.   Here we're talking about mobile applications and wallets that can interoperate with others, and allow a Muggle - a crypto newbie - to own and manage their own investment.  

Yes - I know;  there are a lot of these new mobile applications!   And that's exactly what we need to see to keep adoption growing.   And it's continued to climb:

crypto users cambridge study

But we also need to avoid trouble.   Even though people using traditional finance are subject to crime and fraud as well, the cryptomarket is especially vulnerable to bad publicity.   Crypto is a hot topic for many financial news programs, so even small incidents could give us a black eye.   The cryptomarket has begun to shake its historical connection to criminal elements, and we need to continue to work on our collective public image.   New crypto custody solutions for ordinary investors need to be secure.  

So, what is the most important aspect of new custody solutions?

Interoperability.   Crypto needs to inter-operate with traditional modes of personal finance.   We need people to be able to hold crypto in their savings and checking accounts.   And we need the FDIC and other governmental agencies to acknowledge that an increasing proportion of their citizenry is using alternative currency in the form of cryptoassets.  

This is money, albeit with no historical precedent.  

And it's incumbent upon the first citizen users of crypto to lobby for its treatment as a legitimate alternative that will democratize personal finance.   Nobody will do it for us, despite crypto's increasing prominence in the public mind-space.   We need to start asking aspiring politicians their views on crypto and whether they support digital assets.   We need to frame the public discussions.  

It's up to you and me - the Crypto Wizards - to help the Muggles understand.  

General Crypto News

A new study conducted by Global Market Insights was profiled on the Marketwatch website recently:   The study concluded that the digital banking market may be valued as high as $9 trillion dollars by 2024, due to macro-trends identified in the report.   1

The trends mentioned in the report included:

  • Need to provide enhanced customer experience
  • Generational shift
  • Increased expectations of the 'hyper-connected'

The report also profiled a long list of companies that have been making substantial investments in the digital banking and fintech space, revealing massive increases in investment activity.   In 2013, the amount of investment by venture capitalists in the digital banking and fintech sector was estimated at $3.7 billion dollars.  

Jump forward to 2017 and that investment is estimated at $16.5 billion.  

The massive increase in investment is generally taking two forms;  either the large banks and financial services providers are developing their own customer-centric digital products, or they are purchasing smaller companies that can supercharge their efforts.  

In reading the summary of the study findings, I was not surprised;  in fact, I suspect that these numbers may be reached far quicker than people realize.   While the drivers for this change are obvious in the younger generation as the study indicates, all age brackets have been adopting other forms of technology such as smart phones.  

I expect that when convenient banking options are integrated with mobile technology, the move towards digital banking may be quickened to a substantial degree.   In my opinion, the key driver to how expeditiously this will happen will be how rapidly technologists can match convenience with security.   I can envision even the most punctilious, traditional banking customers making the switch if they honestly feel that it's safe to do so.  

Hester Peirce's Comments

The University of Missouri School of Law hosted an event on February 8th titled "Protecting the Public While Fostering Innovation and Entrepreneurship:  First Principles for Optimal Regulation."  2

Hester Peirce, Commissioner with the Securities and Exchange Commission (SEC), was one of the listed speakers, and provided an in-depth treatment on the topic of regulation, and subsequently published it on the SEC website.   3   4

Her opinion provided very clear demarcations about what constitutes a security and what does not, applied directly to the topic of crypto-assets.   Here is one interesting quote from her paper:

"When the tokens are not being sold as investment contracts, however, they are not securities at all.  Tokens sold for use in a functioning network, rather than as investment contracts, fall outside the definition of securities."

Other than the obvious way that statement reflects XRP's situation, it also mirrors the approach that is advocated by the recent "Token Taxonomy Act" bill that was submitted by Congressmen Warren Davidson (OH-08) and Darren Soto (FL-09) late in the 115th Congress.   That bill also delineates securities from true cryptocurrencies, basing it on when the network becomes 'fully functioning.'  5

The paper composed by Hester Peirce was insightful, and balanced the need for enforcement and protection with the need to prevent over-regulation.   She also sprinkled in a true story of 'unanticipated consequences' that added an appropriate and humorous example of how future impacts can be difficult to anticipate.  

My hope is, even independent of the bills currently being planned or debated in Congress, that the SEC adopt the approach so eloquently outlined in her presentation.  

Ripple News

On February 6th, The Asian Banker published an interview with Navin Gupta, Ripple's Managing Director for India, Southeast Asia, the Middle East, and North Africa.  6

The article spent some time providing background about Ripple's latest banking wins, noting that it took the company two years to acquire the first one hundred customers, but only one year to acquire the next one hundred.   It also described how Ripple is operating in all large remittance corridors, and has established deep roots in the Middle East, with nine banks from the UAE, Kuwait, Oman, Saudi Arabia and Bahrain.  

Towards the end of the interview, Navin Gupta chose to use Siam Commercial Bank as an example of RippleNet's value proposition:

“Ripple offers a unique advantage.  It saves international banks from having a direct banking relationships with a multitude of countries in frontier markets.  

Siam Commercial Bank (SCB) is able to clear all transactions on behalf of its international counterpart and provides the last mile connectivity SCB offers into this region, in this case, ASEAN.  

At the same time all the benefits of Ripple stay as they are such as instant debit and credit, tracking payments from start to finish, ability to pre-validate the bank account and you don’t have to have currency risk in local currencies.”

This comment struck a chord with me, because often in business it's the indirect impact of high complexity that ends up containing much of the cost for banks and corporates that must solve their cross-border payments challenges.   The simplification of this process will be an attractive piece of the puzzle for many potential future RippleNet customers.  

Binance Blockchain Singapore

A video was recently shared on YouTube of a panel session at the Binance Blockchain Singapore Conference that took place from January 19 - 22.  

The panel included Eric van Miltenburg, Ripple's Senior Vice President of Global Operations:  7   The other two participants on the panel were Andy Tai, Head of Media and Technology for SEA at Goldman Sachs, and Justin Chow, Head of Business Development for Asia at Cumberland.  

Video of the event was posted by a fan on YouTube, but then subsequently removed;  prior to its removal, I was able to view it, however, and hopefully Binance can post an official version at some point in the near future.

About halfway through the panel discussion, Eric van Miltenburg spoke about the need for regulatory clarity:

"It's been touched on before, yesterday and today ... regulatory clarity.   I think, for large corporations, and certainly for the larger financial institutions that we work with;  before they're ready to really embrace digital assets in this type of transaction, they just need to be sure that they're not stepping outside of any predefined lines."

And later on when Justin Chow asked him to expound on resistance that Ripple encounters in its go-to-market activities:

"We're approaching the banks that service the large corporates ...  

...  the thing that is clear is that they look at the solutions that have been at their fingertips to date, and they're not thrilled with them.   The SWIFT approach is forty-five years old.   It has a lot of holes.   There's certainly a willingness and an appetite to listen.  

The flip side is that SWIFT has been around for forty-five years, and they've used it for so long.   It's, sort of, the 'devil you know.'   There's a process to educate that there's real value;  now that we've grown our network, we're adding on average about two new financial institutions per week to RippleNet.   So there's starting to be a lot more proof points and reference accounts so you can show the benefit."

Although these were points that we've encountered in prior presentations as well, it's great to hear them reiterated in such a strong fashion in a high-profile conference.

It's also worth keeping in mind that this conference took place a few days prior to Brad Garlinghouse's debate with Gottfried Leibbrandt, the CEO of SWIFT at the Paris Fintech Forum, so Eric van Miltenburg's comments no doubt helped set the stage for that subsequent interaction.  

University Blockchain Research Initiative

Ripple's University Blockchain Research Initiative, or UBRI for short, is a program that Ripple created to help fund educational programs in blockchain technology among various worldwide universities.  

The program was started in June of 2018, when Ripple set aside $50 million dollars for it, and identified seventeen initial candidates for the funding.  8

The curriculum that the initiative funds is wide-ranging, and is not limited to only technical aspects of the new industry;  at Princeton, Ripple funded a program that will study how blockchain innovations impact public policy around the world and in the US.  

On February 7th, Ripple announced that they'd be adding eleven new UBRI partners to the program, including some that had already been announced in piecemeal fashion on social media previously:

  • Carnegie Mellon University
  • Cornell University
  • Duke University
  • Georgetown University
  • University of Kansas
  • University of Michigan
  • Morgan State University
  • National University of Singapore
  • Northeastern University
  • University of São Paulo
  • Institute for Fintech Research, Tsinghua University

The official press release reiterated how the funds are ear-marked, saying:  9

"Partners will utilize UBRI resources in unique ways by developing curricula, expanding or launching courses, hosting conferences and awarding scholarships to faculty and students pursuing work in blockchain, cryptocurrency, digital payments and related topics."

The initiative is a great way for Ripple to interface with a wide variety of university programs that can help prepare students for the changes taking place in fintech, finance, and technology related to the intersection of blockchain technology.   Other companies such as Microsoft have invested in education in the past to their own great benefit as well;  it's an approach that can reap huge rewards, however indirect, by expanding the industry as a whole, and by educating the next generation of entrepreneurs and computer scientists.  

XRP News

I normally convey benchmarks of wallet statistics at quarterly or yearly intervals;  however, there was a recent milestone worth mentioning that passed with little fanfare.  

The number of funded wallets on the XRP Ledger just broke the 1.5 million accounts level:

Ledger Exposed Statistics

This is a significant milestone indicative of steady worldwide growth of an investing public increasingly convinced about XRP's utility as a digital asset.   Unlike proof-of-work cryptocurrencies, XRP's value does not rest solely on speculative interest, but also on its use in commerce.   Banking adoption of XRP has just begun, and new entrants to the cryptomarket are increasing their holdings of the digital asset as 2019 rolls forward.  


Bitcointrade:  Bitcointrade is a small Brazilian Exchange that offers the top crypto volume leaders.  This Brazilian exchange is notable because it offers direct fiat pairings of the Brazilian Real with XRP.   10

Abra:   On February 7th, Abra announced that they would be adding the ability for their XRP holders to purchase fractions of securities, including Facebook, Amazon, and Netflix.  11

Help The Muggles Learn About Crypto

The future of crypto is quickly approaching.  

While we are a tiny minority of the world's financial stakeholders, new modern solutions, services, digital banking, and other innovations are being developed as we speak.   These new creations will contain the ingredients to support widespread mainstream adoption of crypto-assets:   Interoperability, convenience, security, and transparency.  

In the meantime, those of us already cognizant of crypto's significant innovation can assist in our own way.  

We can reach out to others and educate them about cryptocurrency in general, and provide a positive reference point to counter crypto's compromised public image.  

This will require cooperation among various businesses, champions, and stakeholder organizations, to commit to a new cultural norm that respects scientific innovation, rational discourse, and has the ability to interface with real-world businesses that demand reliability, security, scalability, and conformance to regulations.  

The way forward for crypto requires us to visualize how those "Muggles" among us can safely take a step into the world of crypto and join the rest of us that have opened our eyes to the future.  
xrp symbol
Sources and Credits:
Cover Art: Thank you to Almos Bechtold