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

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.