Ripple’s XRP escrow method questioned, lawyer says supply could have been fully released by 2023

Lawyer Bill Morgan has raised concerns about Ripple’s long-standing approach to distributing XRP held in escrow, arguing that the company could have completely released its escrowed holdings by the second half of 2023 if it had not periodically relocked unused tokens.

Ripple’s XRP Escrow Mechanism Under Scrutiny

Ripple, the company behind the global digital payment protocol and issuer of XRP, established an escrow system in December 2017. At that time, Ripple placed 55 billion XRP into 55 separate escrow contracts to manage the supply entering the market each month.

Each month, up to 1 billion XRP becomes available to Ripple for release. Historically, Ripple has chosen to send a portion of the unlocked amount back into new escrow contracts, rather than distributing the full monthly allocation. This strategy extends the release timeline of the total escrowed XRP, maintaining a significant balance in reserve.

Morgan suggested that if Ripple had released the full 1 billion XRP every month without relocking any tokens, the company would have depleted the entire escrow by mid-2023.

He further estimated that XRP’s circulating supply would now account for about 95% of the total 100 billion tokens.

Mini dictionary: Escrow (in crypto) refers to a mechanism where assets are held by a trusted third party and released according to preset conditions. In Ripple’s case, escrows help manage the scheduled release of XRP, aiming to control supply and market impact.

Morgan’s remarks rekindled ongoing debate in the XRP community regarding the overall impact and necessity of Ripple’s escrow strategy.

Morgan argued that Ripple should have “just distributed 1 billion per month since” the 2017 escrow setup, claiming this policy would have already cleared the remaining escrow balance and minimized frequent criticism.

Criticism of Ripple’s Escrow Practices

Morgan’s statements focus on the persistent complaints targeting Ripple’s monthly escrow releases. Many critics of Ripple continue to point to the escrow process as a reason for price stagnation and call for remaining tokens to be burned.

He noted that the ongoing criticism would likely persist even after the entire escrow is depleted, as detractors may simply shift focus to another aspect of Ripple’s token management or business strategy.

He has expressed frustration regarding how repeated objections to Ripple’s periodic releases overshadow broader discussions about XRP’s adoption and use cases.

Debate Within the XRP Community

Morgan’s comments generated varied responses within the XRP community. Some users supported his viewpoint, suggesting that ongoing complaints about Ripple’s escrow are largely unfounded and that retail investors control only a minor share of the total XRP supply.

Others, such as community member Digital Finance Daily, disagreed with Morgan’s premise. They argued that releasing the maximum amount of XRP each month, with no relocking, could have flooded the market, leading to excess supply over demand. This approach, the commenter stated, could have resulted in increased selling pressure and a weaker price for XRP.

Digital Finance Daily further noted that simply running out of escrow would not automatically benefit XRP’s price. Instead, they highlighted that future demand growth and actual XRP usage would be key factors in determining the asset’s value, rather than the completion of escrow releases itself.

The opposing viewpoint suggested that the release of all 1 billion XRP monthly, without relocking unsold tokens, could have resulted in insufficient market demand and led to lower prices due to intensified selling pressure.

The discourse reflects two main questions: whether Ripple could have accelerated its outflows from escrow, and if the market would have been able to handle the faster pace of distribution without downside effects for XRP’s price and liquidity.