Ripple CTO: XRP Ledger Has No Tax, Focuses on Utility

The controversy emerged when Matthew Sigel, head of digital asset research at VanEck, raised pointed questions about the XRP Ledger’s economic model. Sigel questioned who benefits if XRP holders don’t earn from the ecosystem and the protocol itself doesn’t generate value, suggesting that if no one profits, someone must be collecting a tax. This framing forced a fundamental reexamination of what constitutes value in blockchain networks.

David Schwartz’s response on X social media was unequivocal: “The XRP Ledger does not impose a tax on its users.” The Ripple CTO explained that transaction fees and reserves exist solely as anti-spam measures, not as mechanisms for wealth extraction. Schwartz emphasized that ownership of XRP does not grant anyone the right to collect fees or profits from the ledger itself, drawing a direct comparison to Bitcoin’s blockchain model where similar decentralized functionality operates without token holder profit requirements.

The community response highlighted the philosophical divide in cryptocurrency approaches. XRPL dUNL validator Vet and other community members argued that the absence of taxation actually encourages developers and users to focus on building meaningful, functional use cases rather than relying on passive income mechanisms. This perspective positions XRPL as fundamentally different from networks designed primarily for investor returns.

Schwartz’s framing of the XRP Ledger as a public utility represents a significant departure from profit-centric blockchain models. He detailed how the ledger allows holders to issue assets, trade, create NFTs, and make payments without central authority extracting value from these financial activities. This utility-first approach emphasizes the network’s capacity to enable financial independence and reduce reliance on traditional intermediaries.

The XRP Ledger’s support for decentralized exchanges (DEXs), stablecoins, and NFTs functions without requiring XRP holders to profit from system operations. Schwartz argued that this design philosophy actually enhances the network’s value proposition by focusing on practical functionality rather than wealth extraction. The Ripple CTO explained that focusing on tax collection as a measure of success can overshadow the blockchain’s core purpose of promoting open access and meaningful innovation.

This utility-focused model challenges the assumption that blockchain networks must generate direct revenue for token holders to be considered successful. Instead, Schwartz positioned XRPL’s value as deriving from its ability to facilitate financial activities with reduced friction and intermediary dependence, creating value through efficiency and accessibility rather than through profit distribution mechanisms.

The tax debate intersected with broader discussions about XRPL’s real-world applications and their relationship to token holder value. When Sigel questioned the blockchain’s relevance, community members pointed to the significant collaboration between Ondo Finance, Ripple, and BlackRock, where the XRP Ledger will be utilized for stablecoin issuance, minting, Treasury asset redemption, and liquidity enhancement in financial markets.

Sigel acknowledged the innovative nature of this initiative but maintained that these applications don’t directly generate revenue for XRP token holders, highlighting what he perceives as a gap between network activity and personal gain. This perspective reflects a traditional investment mindset that prioritizes direct financial returns over ecosystem growth and utility enhancement.

Schwartz countered by explaining that the value of XRPL stems from enabling financial independence rather than providing passive income. The recent BlackRock and Ondo Finance collaboration demonstrates how major financial institutions are leveraging XRPL’s capabilities for practical applications, validating the network’s utility-focused approach even if it doesn’t translate to immediate profit distribution to token holders.

The XRPL tax debate reveals fundamental philosophical divisions within the cryptocurrency space about what constitutes successful blockchain design. Schwartz’s position champions a model where value accrues through utility and adoption rather than through direct revenue extraction, positioning XRPL alongside Bitcoin as networks that prioritize functional decentralization over profit mechanisms.

This approach has significant implications for developer focus and network evolution. By eliminating expectations of passive income, the XRP Ledger ecosystem encourages builders to concentrate on creating genuinely useful applications rather than designing revenue-extraction features. This could potentially lead to more sustainable long-term growth as the network’s value proposition becomes increasingly tied to practical utility rather than speculative returns.

As the cryptocurrency industry matures, the XRPL model presents an alternative path for blockchain development—one where success is measured by real-world adoption and functional utility rather than by profit distribution to token holders. The ongoing debate between Schwartz and Sigel represents a crucial conversation about the fundamental purpose of blockchain technology and how different networks create and distribute value in the decentralized economy.