(Bloomberg) -- It’s only a matter of time before central banks adopt blockchain to settle high-value, interbank fund transfers, according to the head of Ripple, whose technology has won support from former Fed Chairman Ben S. Bernanke.
As the technology, which is based on encrypted distributed ledgers, catches on, central banks around the world will be afraid to miss out, Ripple Chief Executive Officer Brad Garlinghouse said Thursday in an interview with Bloomberg.
“Once that movement takes hold, that acceleration goes quickly,” Garlinghouse said on the sidelines of the Singapore FinTech Festival. “Is it one year or is it five years? It’s probably somewhere in between.”
His opinions carry some weight, as the head of a payments-focused blockchain developer that’s tied to the fourth-largest cryptocurrency by market value. Ripple worked recently on a blockchain trial with the Bank of England and earlier this month hosted officials from more than two dozen central banks at a blockchain summit in New York.
The San Francisco-based startup helps financial institutions process global payments using blockchain and works with over 100 firms. Its backers include venture capital firms Andreessen Horowitz and Google Ventures and banks such as Standard Chartered Plc and Banco Santander SA. American Express Co. said Thursday it will use Ripple’s network for overseas payments to Santander customers in the U.K.
In October, Ripple’s technology was described as “promising” by Bernanke, who oversaw the Federal Reserve in the aftermath of the financial crisis. His appearance at a Ripple-hosted conference in Toronto as a keynote speaker had surprised some pundits, owing to his previous skepticism over cryptocurrencies.
Central banks that are exploring blockchain technology include:
- Bank of England: Conducted a proof of concept test with Ripple, integrating the company’s blockchain technology for simulated cross-border payment.
- Bank of Canada: Collaborating with Payments Canada and TMX Group to experiment with an integrated securities and payment settlement platform.
- Monetary Authority of Singapore: Leading a group of banks, the city’s stock exchange and technology companies to explore applications for payments
- Hong Kong Monetary Authority: Developing a cross-border network for trade and trade finance with Singapore’s MAS
While a rising number of entities are exploring blockchain-based payments, including the global cross-border service SWIFT and upstarts such as the Enterprise Ethereum Alliance, Garlinghouse doesn’t see them as competitors.
“There’s a massive difference between testing something and deploying it at scale,” he said.
Industries from finance to health care to utilities are working with blockchain, with the goal of radically changing how payments are tracked, securities and derivatives trades are processed, and health records are stored, among potential uses. Ripple refers to this as the “internet of value,” where money travels as far and as fast as information moves on the internet.
While Ripple isn’t considering going public just yet, Garlinghouse signaled that the company is open to buying payment companies. He put a value of more than $12 billion on Ripple’s holdings of its cryptocurrency, XRP.
“Companies often go public so that they have a security they could use to make acquisitions,” he said. “Our hurry to go public may be lower because I can use XRP as a strategic asset to invest in an ecosystem and to maybe make acquisitions.”
©2017 Bloomberg L.P.