As an “extreme investor,” I’ve been steadily building wealth through dividend reinvestments. But here’s a little secret: I’ve dipped my toes into cryptocurrency. For me, cryptocurrency is an experimental venture, a way to explore a completely new asset class.
Among the cryptocurrencies out there, Ripple (XRP) has caught my attention. In this article, I’ll share why I’ve chosen Ripple, what makes it unique, and what you need to know before diving in.
1. What is Ripple (XRP)?
Ripple is a type of cryptocurrency, primarily designed to revolutionize international money transfers. Think of it as “a super-fast digital solution for sending money overseas.”
The Strengths of Ripple (XRP)
- Speedy International Transfers
With traditional banks, sending money abroad can take three days or more. Ripple, on the other hand, processes transactions in seconds or minutes.
→ Imagine sending money like a quick message on a chat app. - Low Transaction Fees
While banks often charge hefty fees for international transfers, Ripple’s fees are just a few cents.
→ It’s like sending mail without the cost of a postage stamp. - Adoption by Major Banks
Ripple’s technology is already being tested and adopted by financial giants like SBI Group in Japan. This could pave the way for broader usage.
The Weaknesses of Ripple (XRP)
- Price Volatility
Ripple’s value can fluctuate dramatically. For example, its price could be 100 yen today and drop to 50 yen tomorrow.
→ Think of it as a rollercoaster ride for your money. - Centralization Concerns
Unlike Bitcoin, Ripple is managed by Ripple Labs, making it less decentralized. While this adds efficiency, some criticize it as lacking the core philosophy of cryptocurrencies. - Regulatory Risks
In the U.S., Ripple is embroiled in a legal battle with the SEC over whether it should be classified as a security. The outcome could significantly impact its future.
2. Where Can You Use Ripple in Real Life?
While Ripple’s real-world use is still limited, there are several scenarios where it’s making strides:
Domestic Use Cases
- Payment at Stores Accepting Cryptocurrency
Some shops and restaurants in Japan accept cryptocurrency payments. For example, BicCamera supports Bitcoin payments and may expand to Ripple in the future. - Money Transfer Services
SBI’s MoneyTap app uses Ripple technology for bank-to-bank transfers. Although it doesn’t involve directly sending XRP, Ripple’s infrastructure is at play. - Online Shopping and Donations
Certain international e-commerce platforms accept Ripple as a payment method. Additionally, some NGOs accept Ripple donations for charitable contributions.
3. Ripple vs. Cash: Why Does Tax Come Into Play?
You might wonder why using Ripple as payment triggers tax implications, unlike cash. Here’s the difference:
Key Differences Between Cash and Ripple
- Cash: A 1,000-yen note always holds a value of 1,000 yen, with no gains or losses when used.
→ Spending cash simply reduces your balance. - Ripple: Its value fluctuates. When you use it, the difference between the buying price and the current value creates a taxable profit.
→ This fluctuation turns into income that’s subject to taxation.
Why Does Tax Apply?
Using Ripple for payment is considered a “disposal” or “sale” of the asset. For example:
- If you bought Ripple at 100 yen per unit and use it when it’s valued at 200 yen, the profit (200 yen - 100 yen = 100 yen) becomes taxable.
- These profits are classified as “miscellaneous income” under Japanese tax law. If your total annual gains exceed 200,000 yen, you’re required to file a tax return.
4. Why I Hold Ripple
I’ve been holding Ripple since 2020. Here’s why it appeals to me:
- Dreams and Potential
While Ripple carries the risk of becoming worthless, its potential to revolutionize global finance makes it worth the gamble. Even a small amount holds the possibility of exponential growth. - Starting Small
I began with small investments through platforms like BitFlyer and SBI VC Trade. Recently, I started using points earned on Moppy to buy Ripple, turning everyday purchases into investment opportunities. - A Spice in My Portfolio
Ripple isn’t the cornerstone of my wealth-building strategy—it’s the spice. It accounts for just 1-2% of my portfolio, offering diversity and a touch of excitement.
5. Important Considerations: Tax Implications When Using Ripple
Using Ripple = Selling It
When you use Ripple for payment, you’re effectively selling it. This means any profit generated from the price difference is considered taxable income.
Example Scenario:
- Buy Ripple at 100 yen per unit.
- Use it at 200 yen per unit for payment.
- Profit = 200 yen - 100 yen = 100 yen.
If such gains exceed 200,000 yen in a year, you’ll need to report them in your tax return.
6. Conclusion: Ripple as a Spice for the Future
Ripple isn’t a mainstream asset yet, but its potential is undeniable. Here’s how I approach Ripple:
- Start Small: Use point systems or small investments to manage risk.
- Hold Instead of Selling: Avoid selling until tax regulations improve.
- Focus on the Future: Monitor developments in global payments and financial systems.
If you’re curious about cryptocurrency, why not start small and explore its possibilities? Ripple might just spice up your portfolio too!
Final Thought for Readers
Have questions about Ripple or cryptocurrency? I’d love to hear your thoughts—let’s explore this exciting new frontier together!