A new proposal that was submitted to the US Securities and Exchange Commission’s (SEC) newly established Crypto Task Force of a Maximilian Staudinger, makes the case for XRP as a “strategically financial asset” for the United States (using a very questionable math and logic).
I am here to tell you that XRP is not a strategic asset and that the logic of this proposal is at best questionable.
In the proposal, Staudinger states that $ 5 trillion is unlocked in US nostril accounts (accounts that banks use for cross -border payments). And he claims that if certain legislative conditions were created – including SEC that classifies XRP as a payment network, the US Ministry of Justice (DOJ), which provides legal approval for banks to use XRP, and Federal Reserve that requires banks to use XRP as a liquidity solution – then 30% of this capital ( 25 million bitcoin for $ 60,000 per Bitcoin.
So let’s break down why it makes a little sense.
First, NosTro accounts are simply bank accounts that US banks have abroad. I’m not sure what kind of logic includes these domestic banks that turn the US dollars that XRP theoretically replace to the federal government, so these dollars could then be used to acquire Bitcoin on behalf of the government.
Secondly, the proposal does not offer details of how these domestic banks would get XRP that would replace dollars. It only seems logical that they will have to buy XRP, leading to the XRP absorbing this $ 1.5 trillion, not Bitcoin. Even if Ripple, XRP’s issuer, would simply give these banks XRP for use, this would still not work as it only applies to about $ 100 billion in the XRP – well below $ 1.5 trillion.
Third, even though Bitcoin’s price was to dip to $ 60,000, the price would start immediately when the US government started buying the 25 million bitcoin.
Finally, there is a hard cap of 21 million bitcoin (and about 4 million has been lost), which is a well-known fact in the Bitcoin or crypto area. Therefore, it is quite silly to suggest that the US government could buy 25 million bitcoin. If the author was even a half serious person, he could have suggested that the government buy 15 million bitcoin for $ 100,000 per year. Bitcoin (although math still wouldn’t work).
Given how defective the logic behind this proposal is, it is difficult to consider XRP a strategic asset. Plus, why should the US government do it when two -thirds of the supply is still in the hands of the organization that issued the asset? It doesn’t make much sense.
Bitcoin, on the other hand, is a globally distributed asset that many worldwide use as both money and a store with value. Plus, the Bitcoin network is controlled by tens of thousands of nodes and is almost impervious thanks to the approx. 0.4% of the world’s energy that protects it. (The XRP network is controlled by 828 nodes and is not protected by any amount of energy.) Theser factors make Bitcoin a logical reserve asset, which is how the US government now officially classifies it.
So hopefully SEC already understands what I’ve outlined in this piece, and don’t spend much time considering Mr. Perhaging’s proposal.
This article is a take. Opinions expressed are completely the author’s and does not necessarily reflect BTC Inc or Bitcoin magazine.