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Ripple has invested into Mexican exchange Bitso in order to ensure liquidity of the cryptocurrency XRP. Having this liquidity allows for a one-way flow of cross-border payments to destination countries, like Mexico.
Additionally, Ripple’s SVP of product, Asheesh Birla, will also be joining Bitso’s board. Birla will be helping Bitso to expand to new regions, such as Brazil and Argentina—as well as strengthening the partnership between Bitso and Ripple.
“Ripple has always been committed to growing a strong, healthy XRP ecosystem to enable faster, cheaper global payments,” Birla told Decrypt. “This partnership will help further the growth of the ecosystem by offering greater liquidity for payments.”
The key to understanding the deal is liquidity. Ripple provides services for sending cross-border payments to countries around the world, finding a niche in hard-to-access countries, like Mexico. Already companies including MoneyGram are using its services to send payments in XRP to the country. However, it creates a challenge.
With a lot of XRP flowing into the country, it needs to be sold for Mexican Pesos. This requires a liquid exchange market between the cryptocurrency and the fiat currency. But with the money mainly moving one way, it could result in an uneven market (lots of sellers, not many buyers) which could tank the price in the specific market. So, there needs to be adequate liquidity.
Ripple tries to solve this with its on-demand liquidity (ODL) offering. This enables financial institutions to source XRP when necessary. And Bitso is one of Ripple’s key partners for providing this in Mexico. Which explains how valuable this partnership is.
“Bitso currently plays a vital role in ODL by providing critical liquidity for payments within the US <> Mexico corridor. Earlier this year Ripple launched ODL capabilities with MoneyGram into Mexico, with Bitso as the key exchange partner,” Birla said, adding, “Bitso is the largest exchange in Mexico with a customer base of 750,000 and high trading volumes, ensuring liquidity remains high for consumers.”
And there’s a bigger picture to be seen too. Birla said, “This investment and partnership will be instrumental in strengthening and expanding ODL in LATAM (Latin America).”