Ripple CTO David Schwartz clarifies whether the payments company can continue to use XRP for its Ripple payment transactions following the preliminary injunction resulting from the SEC lawsuit.

Schwartz’s remarks came in response to comments by critic and community personality “Scam Detective.” Recall that in addition to Imposition of a fine of $125 million Judge Analisa Torres also issued a preliminary injunction to prevent Ripple from further violating securities laws through institutional XRP sales.

Can Ripple continue to use XRP for ODL in the US?

This part of the ruling has been the subject of debate due to its ambiguity, especially among people unfamiliar with legal developments. Most recently, Scam Detective has suggested that the injunction prevents Ripple from using XRP for on-demand liquidity (ODL) transactions in the United States.

As a reminder, ODL is now part of the newly rebranded Ripple Payments service. Previously, Ripple partnered with American exchange Uphold to leverage its collaboration with the exchange to conduct ODL transactions in the US through a nexus.

Fraud Detective argues that since Judge Torres’ injunction stops institutional sales of XRP, it also means that Ripple cannot use XRP for these ODL transactions in the US, since ODL transactions are also categorized as institutional sales.

Comments from Ripple CTO

In response, David Schwartz clarified that there is a difference between “using” XRP and “selling” XRP. Although it was not explicitly stated, the Ripple CTO’s comment implied that there is a difference between selling XRP to institutions and the company’s use of XRP, particularly for its payment services.

Do you think selling XRP and using XRP are the same thing?

— David “JoelKatz” Schwartz (@JoelKatz) 8 August 2024

Scam Detective also asked Schwartz to confirm whether Ripple is indeed using XRP to facilitate ODL transactions with a US nexus party. The Ripple CTO clarified again that actually doing something is different from being able to do something. Essentially, even though Ripple may not currently use XRP for ODL transactions with a U.S. nexus, that doesn’t necessarily mean the company can’t do so.

To prevent further back and forth, provided a Ripple Payments Documentation page, which links to the information at the bottom of the page. The information relates to the payment flow that occurs when Ripple uses XRP for cross-border settlements.

After the sender enters the payment information, Ripple validates the transaction and makes sure it is compliant before approving it. Then, Ripple’s payout partner makes sure the transaction is compliant and then approves it. Once approved, the system moves XRP and converts it into the target currency.

The comments from Ripple’s CTO suggest that the company could continue to use XRP for these payments despite the injunction. As previously reported, industry experts such as CapSign founder Matt Rosendin and attorney Jeremy Hogan also confirmed this in several comments.