IMF Puts XRP as One of Three Possible Solutions to Cross-Border Settlement Issues

A 2023 IMF document placed XRP on a short list of technologies that could support future cross-border settlement systems.

The organization shared this view in a March 2023 report dubbed “Fintech Note, Trust Bridges and Money Flows: A Digital Marketplace to Improve Cross-Border Payments,” which discussed why global payments remain slow and costly and how digital money presents a better path forward. 

Notably, the analysis naturally led to XRP’s inclusion among the three models the IMF considers suitable for next-generation payment infrastructure. While the document is over two years old, it recently resurfaced within the XRP community.

Issues with Cross-border Payments

In its opening, the report identified a major payments issue. Specifically, it noted that international payments rely on fragile trust networks built on credit relationships between banks. 

For context, domestic payments flow more smoothly because central banks supply a shared settlement asset and a unified platform. However, once payments cross borders, these advantages disappear. 

This is because banks must create their own bilateral trust links, meet heavy compliance demands, and constantly evaluate counterparty risks. These challenges raise fees, slow transactions, and block access for many developing countries.

The IMF then mentioned how banks currently move money across borders. According to them, the two methods in use today are credit arrangements, where one bank issues an IOU to another, and pre-funding arrangements, where banks hold liquidity abroad to meet payment needs. 

However, both approaches raise costs and give a small group of large correspondent banks outsized control over the system. Central-bank swap lines help during crises, but they depend on political alignment and trust that many central banks do not share.

Tokenization Could Help Address Pain Points

After outlining these problems, the report highlighted tokenization as a promising alternative. Notably, digital tokens move through shared ledgers, which allow instant transfer of ownership without relying on complex bank-to-bank credit arrangements. 

This creates new responsibilities, such as verifying issuers, enforcing compliance rules, and managing user identities. The IMF suggests that digital gateways, which refer to regulated wallet providers and financial intermediaries, can simplify these tasks by acting as trust anchors for both issuers and users.

Importantly, this logic leads to the IMF’s main proposal: a global digital marketplace where different forms of tokenized money can move across borders and convert between currencies with greater speed and lower cost. 

In such a setup, users can move money across currencies as long as their gateways trust the underlying tokens. Market makers would handle currency conversions and improve liquidity.

XRP as One of Three Viable Models

Within this model, the IMF identified XRP as one of three possible settlement frameworks. The report highlighted a private settlement asset paired with a dedicated payment network and used XRP as the most notable example.

The two remaining categories include an open-source model like Stellar and a model that relies on unbacked crypto paired with a payment layer, such as Strike, which leverages Bitcoin and the Lightning Network.

It bears mentioning that the IMF did not particularly recommend XRP or any specific system. Instead, it acknowledged that assets like XRP already operate as settlement tokens on purpose-built networks and could integrate into a larger marketplace for global digital payments.

Besides the IMF, other organizations have also touted XRP’s cross-border capabilities. In a report, cloud payment giant Volante mentioned XRP as one technology for facilitating cross-border payments. Earlier this year, the IIF called XRP and Ripple a viable alternative to existing cross-border payment options.