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XRP MoneyGram Partnership may be on the cards again.
XRP returned to Coinbase’s listings following its impartial win against the Securities and Exchanges Commission (SEC). For this reason, industry watchers have turned their attention to a potential collaboration between global money transfer giant MoneyGram and Ripple.
While MoneyGram is yet to revisit its ties with Ripple, the international remittance company announced plans to provide stablecoin remittances in 2022.
For this reason and Ripple’s court ruling on 13 July that stated XRP was not an illegal security, speculations have intensified on whether the two companies will reinstate their partnership.
Ripple and Moneygram Past Partnerships
MoneyGram integrated Ripple’s technology into its cross-border settlement system in 2018. After this, Ripple followed with a $50 million investment contract the following year.
Filings with the Securities and Exchange Commission indicate MoneyGram gained $11.3 million from its collaboration with Ripple Labs. According to a MoneyGram press release, these funds were received over two quarters in 2019’s fiscal year; $2.4 million in Q3 and $8.9 million in Q4.
In a turn of events, regulatory uncertainty around XRP after the SEC accusation saw both companies terminate their contract in March 2021.
The court ruling, which found XRP was not a security, carries profound implications for XRP and all stakeholders that had a vested interest in Ripple before SEC’s accusations, including MoneyGram.
An intricate tie between MoneyGram and XRP
In a Twitter thread dating April 14, 2023, crypto laws expert John Deaton outlines the complex relationship between MoneyGram, XRP, and the SEC. Notably, Deaton highlights the actions of former SEC Chairman Jay Clayton’s days before he left office.
After Coinbase listed #XRP in late February 2019, @MoneyGram filed a notice with the SEC and read what it said:
“This agreement will enable MoneyGram to utilize Ripple’s xRapid product (XRP) in foreign exchange settlement as part of the MoneyGram’s cross-border payment process.” pic.twitter.com/gpXcx9YQuw
— John E Deaton (@JohnEDeaton1) April 14, 2023
On the cusp of his departure, Clayton dropped the case against XRP, a move that raised questions about the motive behind the decision. It bears mentioning that Clayton met with current SEC Chairman Gary Gensler just a day before clearing the case.
The fact that the SEC allowed this collaboration to flourish 18 months before Clayton resigned raises eyebrows.
If XRP were indeed illegal security, as the SEC had contended, the legitimacy of this partnership seems to have contradicted the regulator’s compliance stance.
Crypto law expert John Deaton argues that the SEC’s theory regarding XRP’s classification doesn’t align with the nature of the partnership between MoneyGram and Ripple.
Delving deeper into history, a noteworthy revelation comes to light. In June 2019, MoneyGram openly communicated with the SEC about its involvement with XRP, and the SEC offered guidance on how to incorporate XRP into its financial reports.
2019 Q4 Report Reveals MoneyGram Consulted with SEC about XRP
For this reason, a peculiar contradiction is apparent. Despite the SEC’s assertion that XRP is an investment contract, they instructed MoneyGram on how to report XRP transactions as a contra expense.
In the 76 years of existence of the Howey Test, a contra expense has never been an indicator of security status. See below:
Beyond these recent legal interactions, it’s intriguing to note that XRP had been mentioned in a 2019 report by the Financial Stability Oversight Council (FSOC).
The report, signed by Jay Clayton himself, highlighted XRP alongside other major cryptocurrencies like BTC, ETH, and LTC. However, the report didn’t label XRP as a security or an illicit asset. Instead, it went on to acknowledge the cryptocurrency’s growing market share.
SEC had Multiple Times Stated XRP was not a Security
Considering the progression of events, it’s pivotal to highlight the timeline leading up to the legal skirmish. Months before Ripple faced legal action, the SEC explicitly stated XRP was not a security. This contradictory stance raised questions about the consistency of the regulatory body’s approach.
The spotlight turns toward MoneyGram’s strategic response as the dust settles following the recent July 13 partial win against the SEC and a rampage of exchange listing.
Industry participants eagerly anticipate whether MoneyGram will leverage this opportunity to its advantage, fostering a closer partnership with XRP in light of recent regulatory clarity.
Such a move will strengthen MoneyGram’s cross-border payments technology, 3-years after partnering with traditional payments giant Visa for the debut of a real-time remittance solution back in December 2020.
Notably, XRP’s rival, Stellar (XLM), has made strategic inroads amid these developments. The Stellar Development Foundation’s CEO, Denelle Dixon, recently revealed a minority stake acquisition in MoneyGram International’s parent company, Madison Dearborn Partners.