Ripple, a blockchain company and rival to bitcoin, on Thursday announced a tie-up with Dallas-based money transfer giant MoneyGram.
The move is significant because the arrangement involves the use of XRP, Ripple’s digital currency, which has recently soared in value but also faced questions about its practical uses.
The partnership will see MoneyGram pilot the use of XRP through a new Ripple service, called xRapid, designed to provide liquidity to financial institutions. In a release announcing the news, the companies touted the speed and efficiency of XRP:
In a statement, Ripple CEO Brad Garlinghouse described the MoneyGram tie-up as a strategic one, and said it would demonstrate XRP’s ability to lower costs for money transfers between friends and families.
While banks around the world are experimenting with blockchain (the underlying technology behind bitcoin and Ripple) to lower money transfer costs, skeptics of Ripple say its XRP currency is unnecessary to carry out transactions.
Garlinghouse, however, makes the case that XRP obviates the need for money transfer shops to maintain local currency accounts (so-called nostro and vostro accounts) in far-flung locations. In an earlier interview, he told Fortune that the use of XRP will allow firms to free up idle capital for other purposes.
This notion of using digital currency as a form of bridge funding is not unique to XRP. Last year, IBM and a consortium of banks in the South Pacific announced a blockchain transfer arrangement that entails the use of a cryptocurrency called Stellar.