XRP is often accused of being a Centralised project because the San Francisco based blockchain company Ripple controls nearly half of the supply of the digital asset. Ripple is also known to sell their XRP holdings for unknown reasons, besides millions of dollars worth of XRP injection into MoneyGram’s business since June of 2019.
However, for the first time, Ripple has reportedly purchased $46 million worth of XRP in the third quarter of 2020. According to the company, the move was an effort to support “healthy markets,” hinting that the company is trying to generate interest around XRP with a buyback program.
This is a common technique used by corporations where it buys its own outstanding shares to reduce the number of shares available on the market. Companies buy back shares for a couple of reasons, such as to increase the price of remaining shares available by reducing the supply or to prevent other shareholders from taking a controlling stake.
Speaking to media outlet The Block, a Ripple spokesperson stated that Ripple might continue to purchase XRP in a bid to support its newly launched platform – Line of Credit beta – that provides On-Demand Liquidity (ODL) customers working capital loans in XRP at costs lot less than other available credit options.
“Long-term, Ripple is building new ODL capabilities to dynamically source XRP liquidity from the open market, not just Ripple,” the spokesperson said.
ODL is king
Ripple’s On-Demand Liquidity product, previously known as xRapid, has been leveraging the company’s native token XRP, to function as a bridge between two different currencies thus eliminating the need for any type of pre-funding.
ODL has sparked a lot of customer interest over the past year and the system has been adopted by some major institutions like Moneygram, the global money transfer giant. Ripple’s Q3 sales were also related to its ODL solution. “ODL-related sales include XRP sales to support ODL (including Line of Credit) and key infrastructure,” the spokesperson noted.
Ripple has sold $35.84 million worth of XRP to ODL customers like MoneyGram in Q3 itself, compared to $32.55 million worth of XRP to direct institutions in Q2. There were no programmatic sales, i.e., XRP sales to cryptocurrency exchanges, in Q3. Ripple had paused their programmatic sales program in mid-2019.
Meanwhile, the report comes days after Ripple set up its new Middle East and North Africa (MENA) headquarters in Dubai International Financial Centre, a leading global financial hub, with over 2,400 companies and its own independent judicial system and regulatory framework.