would ripple gateways be banks?

[domoarrigato]

Hi,  I'm a newbie here, but I've been around the financial industry for a while now, and my question is this:

Wouldn't a ripple gateway that offers fiat currency exchange and provides liquidity normally need to be a chartered bank?

It seems to me that it would - I am almost convinced that it would have to be in order to operate in the US, and probably in most places that customers would feel comfortable wiring money to.  I believe this is different from a bitcoin trading site, since BTC is not recognized as a currency under american law.  I also see that holding fractional reserves would be a big red flag to regulators as well, if a gateway operator tried to do that.

If I am right, I would predict that people will try to set up "ripple banks" and eventually the US will insist that they apply for charters, meet capital requirements, etc and smaller players will have to fold.  If that happens at a point that ripple is popular enough, existing financial institutions will step in and start offering ripple gateways, however, they will assuredly price their services in a way that does not cannibalise existing revenue streams.

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Yes the challenge of having all these ripples how do you get them back out to convert them to fiat and to a bank or cash.

[domoarrigato]

I'm not too worried about converting/cashing out ripples.  I doubt most people will hold any significant quantity.  I see them as a form of account opening fees for the ripple network.  Most people will buy just enough to be able to use the ripple network for other purposes - mainly currency exchange and payments.  The real problem I see is regulation.

[jago25_98]

Yes I think so too - another reason for problems. Likewise on currency exchanger licenses for exchanges too. If one follows the law though, nothing changes? hmm...

[domoarrigato]

Yes I think so too - another reason for problems. Likewise on currency exchanger licenses for exchanges too. If one follows the law though, nothing changes? hmm...

I'm convinced this will change the way the financial system works, I'm just not sure it will level the playing field for the little guy the way a lot of people think.  Some of the exchanges might get bought, and their owners might get rich.  The average person will get faster payment methods.  I believe that, I'm just not sure we are headed for the libertarian utopia as soon as everyone buys bitcoins.

[domoarrigato]

Today, I noticed that I do not seem to see and fiat cross currency trades available on bitstamp (ie. EUR/USD). I did one of these trades when I first opened the account, so I know it used to work. Very curious.