This Is How XRP Will Be Utilized By FedNow in the Background

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The question of how XRP could fit into the global financial system remains one of the most closely watched topics within the digital asset industry.

While supporters have long argued that the asset can serve as a bridge for international payments, discussions often focus on price movements rather than the mechanics of how banks could actually use it.

A recently highlighted video featuring former Ripple legal counsel Jess Cheng has brought that conversation back into focus by outlining a practical framework in which financial institutions could use XRP to settle cross-border transactions behind the scenes.

Former Ripple Legal Counsel’s Remarks Resurface

Crypto researcher SMQKE shared comments made by former Ripple legal counsel Jess Cheng regarding how banks could utilize XRP in cross-border transactions.

In an X post, SMQKE argued that the video demonstrates how XRP could operate in the background of payment systems, describing FedNow as an application layer while positioning the XRP Ledger as a liquidity settlement layer.

The researcher shared a video of Cheng explaining a payment model in which financial institutions can use XRP as a bridge asset to facilitate international transfers between banks that may not have direct correspondent banking relationships. According to SMQKE, the explanation provides insight into the practical role XRP could play in global payments infrastructure.

Cheng Explains XRP as a Bridging Asset

In the video attached to the X post, Cheng described a hypothetical scenario involving two banks, Alphabank and Betabank. Traditionally, cross-border payments often require intermediary institutions or shared account holders that maintain relationships with both banks. Cheng suggested that XRP could eliminate the need for such arrangements by acting as a bridge between the two institutions.

She explained that instead of relying entirely on fiat currencies throughout the payment chain, the banks could use XRP to connect the missing link between them. Cheng stated that XRP, which she described as a digital asset native to the XRP Ledger, could serve as a tool that allows value to move between institutions even when direct banking connections are absent.

According to her explanation, the process would involve one bank transferring XRP to another, with both institutions agreeing commercially that the transfer represents settlement of an underlying payment obligation.

Cross-Border Payment Example

To illustrate the concept, Cheng presented an example involving a company in Brazil making a payment to a company in Thailand. In the scenario, Brazilian reais are withdrawn from the sender’s bank account, while Thai baht are deposited into the recipient’s account.

The challenge, she noted, is determining how the two banks involved can complete a settlement between themselves. Rather than relying on a mutual account holder operating in both jurisdictions, Cheng suggested that one bank could hold XRP while the other agrees to receive it.

Under this arrangement, the banks would record their XRP balances on the XRP Ledger and agree that a transfer of a specified amount of XRP constitutes full settlement of the payment. The amount of XRP transferred would be determined in the agreed exchange rate between the institutions.

Cheng explained that the receiving bank would accept a certain amount of XRP in exchange for local currency payment. In this model, the sender and recipient continue to transact in their respective fiat currencies, while XRP functions as a settlement mechanism between the banks.

SMQKE’s Interpretation

SMQKE presented the video as evidence supporting the view that XRP could operate behind the scenes within payment networks rather than serving as a consumer-facing payment asset.

The researcher summarized the concept by stating that payment systems such as FedNow could function as the application layer, as the XRP Ledger could provide the liquidity and settlement layer that enables value transfer between participating financial institutions.

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