Pro XRP Lawyer Reveals Ripple’s ODL Challenges

Pro XRP lawyer Bill Morgan has uncovered new details about Ripple’s On-Demand Liquidity (ODL) system stemming from the recent filing by Currency Group on March 6 with the SEC. The document outlines financial risks and illustrates how the 2023 banking crisis affected Tranglo’s XRP transactions.

Tranglo’s Liquidity Issues

Tranglo, a crucial Ripple partner in Southeast Asia, faced significant liquidity challenges following the collapses of major banks such as Silicon Valley Bank, Signature Bank, and Silvergate Bank. This disruption severely impacted several crypto exchanges, including two used by Tranglo, which struggled to process XRP transactions. Consequently, various ODL partners temporarily halted the use of XRP, reverting to traditional fiat currency.

Impact of the Banking Crisis

The filing elaborates on how the downfall of prominent U.S. banks led to a liquidity shortage within crypto markets. Many exchanges depended on these banks for cash flow, and when they failed, liquidity evaporated. The exchanges that Tranglo relied on—Independent Reserve and Coins.ph—could not convert XRP into local currencies quickly enough, forcing Tranglo to request its ODL partners to suspend XRP transactions. As a reaction, nine out of eleven ODL partners switched to pre-funding in fiat to maintain their operations. This scenario highlighted the risks of depending on crypto for instant liquidity during banking support outages.

ODL Adoption Declines in 2024

The filing also sheds light on the diminishing rate of ODL adoption in 2024. It revealed that only seven out of Tranglo’s ninety-three active customers utilized ODL in the first nine months, accounting for 4.8% of Tranglo’s remittance revenue and 3.6% of total payment transactions. Although ODL continues to play a role in Tranglo’s business, its limited adoption indicates reluctance among partners to re-embrace XRP after prior disruptions, leading most to opt for fiat pre-funding.

Tranglo’s ODL Framework and XRP’s Role

Morgan pointed out that the filing presents one of the most comprehensive breakdowns of Tranglo’s ODL system. Pages 82 to 85 detail how XRP enhances cross-border transactions, reinforced by a diagram in the prospectus demonstrating XRP’s critical role in Tranglo’s operations. Ripple’s ODL bypasses the need for pre-funded accounts by employing XRP as a bridge currency, promoting faster settlements and reducing costs. Nonetheless, the 2023 banking crisis has exposed vulnerabilities during liquidity shortfalls.

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