Ripple Labs is making regular payments to its ‘partner’ MoneyGram to use its services, the Financial Times revealed over the weekend, even after paying a $50 million initial fee. The newspaper also repeats the assertion of Ripple CEO Brad Garlinghouse, made last year, that Ripple Labs “would not be cash flow positive” without the constant selling of the billions of tokens it minted itself in 2013.
Ripple’s $50 Million ‘Partnership’
Ripple always seems to be trumpeting a new client or two, leading to suspicions about the voracity of its claims to have over 200 institutional clients, and the Financial Times has shone a light on one of its seemingly most prized ones – its deal with MoneyGram.
Rather than this being a case of MoneyGram using Ripple’s services and paying a fee to do so, Ripple paid $50 million for xRapid and XRP integration, with this ‘deal’ coming at a time when MoneyGram’s shares had dived from $17 to $3 in two years.
Ripple Paying Millions Per Quarter
If this wasn’t strange enough, the Financial Times has revealed, through a recent filing by MoneyGram, that Ripple has continued paying MoneyGram to use its platform, to the tune of $2.4 million in Q3 of 2019 and $8.9 million in Q4.
Intriguingly, MoneyGram had tried to list these payments as revenues, which would have benefited Ripple as the payments would have gone under the radar, but the SEC has stated that they must be listed differently, allowing us to see exactly how much and how often Ripple is paying MoneyGram to continue to use its services.
The revelation that a service provider is paying a client to use said service is nothing short of extraordinary, and shows the lengths Ripple will go to in order to pretend that it has a successful business model.
What is even more worrying for XRP fans is how these payments are made – not in cash, but in XRP tokens, which are presumably sold instantly by MoneyGram, adding continuous sell pressure to the token price. And where are these tokens coming from? If they’re not already in circulation then they’re coming from Ripple’s lockup, adding more into the system and further diluting their value.
Ripple “Would Not be Profitable” Without Selling Tokens
The next question must be then, how is Ripple earning money? According to the Financial Times, and anyone with a passing knowledge of crypto, that one’s easy – they’re selling billions of XRP tokens every month:
We would not be profitable or cash flow positive [without selling XRP], I think I’ve said that. We have now.
When Ripple’s 1 billion XRP tokens were minted in 2013, the company kept 60% of them, ensuring they had a ready supply of cash on hand for a rainy decade in case they needed a cash flow injection.
No one could have thought that, eight years down the line and with, apparently, over 200 institutional clients, they would still need to be selling XRP tokens to remain cash flow positive. But then, if you’re in the business of paying clients to use your services, that money has to come from somewhere.
Good luck XRP hodlers. Good luck.
