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NEW YORK (Reuters) – Banks are unlikely to use distributed ledgers to process cross-border payments for now because of scalability and privacy issues, according to Ripple, one of the most prominent startups developing the technology.
“I will concede, we haven’t gotten there yet,” Ripple’s chief cryptographer David Schwartz said in an interview.
Banks have been vocal about taking steps toward deploying the technology originated from cryptocurrencies to make processes like international payments faster and cheaper.
Several banks have tested or deployed a system Ripple developed for international payments that uses a “bi-directional messaging” that can eventually plug them into distributed ledgers, but xCurrent’s technology itself “is not a distributed ledger,” Schwartz said.
XCurrent was used to build Banco Santander SA’s (SAN.MC) international money transfer service One Pay FX, which was launched in April and hailed as one of the first concrete uses of “blockchain-based technology.”
Santander, which is an investor in Ripple, declined to comment.
While xCurrent uses cryptography, each party using the system does not have access to a shared ledger, as is the case with distributed ledgers like ethereum or Hyperledger Fabric.
“We started out with your classic blockchain, which we love,” Marcus Treacher, senior vice president of customer success at Ripple said in an interview. “The feedback from the banks is you can’t put the whole world on a blockchain.”
Distributed ledgers, an umbrella under which so-called blockchains fall, are immutable databases maintained by a network of computers rather than a centralized authority and secured by advanced cryptography.
The technology’s proponents say shared record keeping boosts efficiency and reduces data discrepancies, but distributed ledgers are not yet scalable or private enough for banks, Schwartz said.
XCurrent uses an immutable “interledger” protocol which Ripple says improves on existing payment networks because it offers instant settlement.
“What we hear from many of our customers is that it’s imperative to keep their transactions private, process thousands every second, and accommodate every type of currency and asset imaginable,” Schwartz said. Ripple’s approach is what has enabled it to move beyond tests with banks, he added.
Founded in 2012, Ripple also offers a system called xRapid that works with the distributed ledger behind XRP, the third-largest cryptocurrency by market cap after bitcoin and ether. Ripple holds a large share of XRP.
The price of XRP and other cryptocurrencies soared last year, in part on expectations that their technology will be applied to processes including transferring value between financial firms.
xRapid and XRP are not being used by banks, but have been recently tested by money transfer companies Viamericas and MercuryFX, according to Ripple.
Reporting by Anna Irrera; Editing by Meredith Mazzilli
The U.S. Supreme Court ruling on Masterpiece Cakeshop, which has been hailed as a victory for religious freedom–and a loss for gay rights advocacy groups–is getting some cheers from a surprising corner of the U.S.: non-religious entrepreneurs.
“While I thoroughly disapprove of [Jack] Phillips’ values, I fully respect his right to run his business in accordance with those values, just as I reserve the right for myself,” says Shel Horowitz, a marketing consultant and founder of the firm GreenAndProfitable.com. He notes that while the ruling, at face value, seems unfair to gay and lesbian patrons, the logic of the Court’s decision is solid; it similarly protects entrepreneurs who object to serving, say, openly racist clientele.
Entrepreneurs aren’t siding with Jack Phillips–the owner of the Lakewood, Colorado bakery, recently vindicated in this case–for religious reasons. Rather, some support the High Court’s decision because they simply don’t want to be told how to run their companies. That’s true even among religious founders.
“For me, I prefer to run my practice without government coercion and decide proactively to assist people from divergent perspectives, as opposed to being forced by the heavy hand of the law to do that,” says David Engelhardt, a practicing Christian and founder of his eponymous New York City law practice, Engelhardt Law.
Clearing the Path for Discrimination?
Of course, plenty of entrepreneurs are livid about the ruling, as they fear it could give businesses and other institutions the freedom to mistreat minority customers. “This case will embolden even more bigots to discriminate against us,” says J Mase III. The transgender entrepreneur is the founder of a Seattle-based talent agency called awQward, which represents around 25 musicians and artists identifying as Lesbian, Gay, Bisexual, Transgender, or Queer (LGBTQ).
Rachel B. Tiven had a similar reaction. In a statement, the CEO of the LGBTQ advocate Lambda Legal, based in New York City, writes: “The Supreme Court has become an accomplice in the right’s strategy to hollow out one of its finest achievements, the right to equal marriage.”
Brittny Drye, the founder of CEO of Love, Inc., is similarly concerned that the decision will serve as a pretext for mistreatment of same-sex couples in the future. “While this isn’t a ‘defeat’ for the community, per se, it does give people an argument for not serving gay people,” Drye added. Her company, an integrated wedding site and digital magazine that serves heterosexual as well as LGBTQ couples, promotes a ‘Love List’ of vendors that support same-sex unions.
That fear may be overstated, cautions Wendy Patrick, a business ethics lecturer at San Diego State University. “The court’s limited ruling is focused on anti-religious bias against Jack Phillips, which doesn’t necessarily translate into ‘businesses can now discriminate,” she said.
The decision in the case, as Patrick alludes, has been described as “narrow,” meaning that other similar cases may not necessarily be decided along the same lines. Justice Anthony M. Kennedy insisted on Monday that the Colorado state commission had simply violated the baker’s right to religious freedom back in 2012, when it ruled against him after the couple sued. “The neutral and respectful consideration to which Phillips was entitled was compromised here,” Justice Kennedy wrote in his slip opinion of the court (PDF.)
Narrow Focus, but Long Reach
Even so, legal observers suspect that despite the narrow focus of this decision, the issue will continue to crop up. Because the commissioner supposedly treated Phillips with ‘hostility’ in the 2012 ruling, per Justice Kennedy’s telling in the slip opinion–discrimination did not occur to begin with.
“That argument doesn’t hold water,” suggests JoLynn Markison, a partner with the international law firm Dorsey and Whitney, of the idea that Phillips merely exercised his religious freedom. “The fact of the matter is that he would sell a wedding cake to a heterosexual couple, but not to a homosexual couple and the inquiry ends there.” She adds that such an idea–which smacks of the Jim Crow-era notion of ‘Separate but Equal’–has been used to discriminate against other minorities in decades previous. “Let’s say someone has a sincerely held religious belief that black and white people shouldn’t marry. That’s discrimination,” she says, adding that it’s no different from what happened here.
Although the Supreme Court has hedged, as it were, on deciding whether Phillips’ was within his rights to deny service to the couple, the ruling could influence other high-profile cases–including Arlene’s Flowers v. State of Washington, in which a flower retailer refused to make a wedding arrangement for a same-sex union. “There are a number of cases that are percolating in the court system right now that involve similar questions,” notes attorney Markison. “Even though the court didn’t decide that religion trumps the right to be free from discrimination, it does send a dangerous message to society at large, who may not appreciate the rationale.”
For Mase, the transgender talent agent, the signal point here is that the Supreme Court has drawn what he calls a “false equivalence” between gay people and religious business owners. “There is an assumption that LGBTQ folks have enough capacity to discriminate on the same level, which we know is not possible just based on the numbers,” he says. “This country had sodomy laws until 2003. We cannot act as though the application of the law is the same across the board.”