Understanding and Regulating Twenty-First Century Payment Systems: The Ripple Case Study

Marcel T. Rosner* & Andrew Kang**

Ripple is an open-source Internet software that enables users to conduct payments across national boundaries in multiple currencies as seamlessly as sending an email. This decentralized Internet payment protocol could provide a cure to an inefficient cross-border payments system. Although Ripple’s technology can reduce significant risks and costs that exist in the international payments system, regulators should adopt a new regulatory framework that responds to how this technology works. This Note performs two functions to help regulators realize this goal. It first helps regulators and other market participants understand how Ripple operates by explaining what Ripple is and comparing it to current payments systems. Second, it suggests a series of principles that regulators should use to monitor decentralized Internet payment protocols like Ripple. It does this by drawing from and tailoring existing regulatory principles to account for the risks reduced and presented by Ripple.

* Law Clerk to Vice Chancellor Laster, Delaware Court of Chancery.
** University of Michigan Law School, December 2016. We would like to thank Professor Michael Barr in particular for his care, guidance, and support throughout the development of this Note. We would also like to thank Ryan Zagone, Karen Gifford, and Jess Cheng from Ripple for their comments on earlier drafts, as well as Chance Hill and Danielle Kalil-McLane and the rest of the Notes office for their helpful comments.

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