Ripple cryptocurrency surges as Japanese groups agree to use it.

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Ripple has passed Ethereum to become the world’s second most valuable cryptocurrency by market capitalisation after the California-based cross-border payments company enjoyed an end-of-year jump in its market price.

While the surging price of bitcoin has attracted the most attention this year, smaller rival Ripple’s XRP currency has started to close the gap in recent weeks after signing up several big financial institutions to use its technology.

Last week’s announcement that three of Japan’s big credit card companies have signed up to use Ripple’s technology triggered another bounce in the price of XRP, which is up sixfold in the past month and almost 300-fold in a year.

Its market capitalisation climbed to $76bn on Friday, above Ethereum’s $73bn market value, but well behind bitcoin’s $246bn overall value, according to coinmarketcap.com. Ripple’s current market value would put it among the world’s 30 biggest banks, ahead of the UK’s Lloyds Banking Group or Japan’s Mizuho Financial Group.

Ripple’s cross-border payments system uses blockchain technology — an electronic record-keeping system — to move money almost instantaneously and at low cost between countries and currencies. Blockchain is a core component of cryptocurrencies such as bitcoin and Ripple’s own XRP.

“Ripple has done a good job of convincing big institutions to use their currency,” said Eddy Travia, chief executive of Coinsilium, which advises and invests in companies that use blockchain. “The worry is that when the price goes up so much it moves the focus from the technology to just the speculation.”

Ripple’s technology allows cross-border payments to be completed within 10 to 15 seconds, compared with about three days for interbank transactions using the Swift network, which was created 44 years ago by a consortium of the world’s biggest lenders.

The recent rally in the price of XRP started after a group of Japanese and South Korean banks last week announced the launch of a pilot scheme to use Ripple’s technology for sending money between the two countries.

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Ripple has much more XRP in reserve than is publicly traded, giving it a war chest worth about $115bn, which it plans to use to encourage banks and other large financial institutions to use its technology.

The US company has signed up more than 100 financial institutions to use its blockchain technology to move large sums of money across borders.

Ripple offers various types of cross-border payments. One system allows customers to buy and sell XRP to move money almost instantaneously between countries and currencies. Another uses a blockchain ledger to record and co-ordinate transfers between banks’ own accounts.

“2017 has been the year of the digital asset, and XRP has clearly outperformed every other digital asset,” Brad Garlinghouse, Ripple’s chief executive, told the Financial Times. “The reason for that is that the market has realised that XRP is a highly efficient payments mechanism that is solving real world problems for real world customers with real money.”

He said that “people are increasingly realising that bitcoin is not going to be a panacea for all these payments problems that people imagined it would solve”. He added: “Payments with XRP settle in a few seconds, but if you buy a cup of coffee with bitcoin it will be cold by the time the payment has been settled.”