Better Cryptocurrency to Buy Now With $3,000: XRP (Ripple) vs. Monero (XMR)

If you're looking to allocate $3,000 to crypto, you've doubtlessly heard of assets like XRP (CRYPTO: XRP) and Monero (CRYPTO: XMR), and you probably already understand that they're very different in terms of their goals and capabilities. But, with the chance of long-term growth potential for both, there's quite a lot to hash out before making a decision.

Let's expedite that process by comparing them and determining which is going to be the better investment today.

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Monero's core appeal is also its largest risk

Monero is a privacy coin, meaning that it tries to make transactions hard to trace by obscuring who sent what to whom. It does that with cryptographic tools like ring signatures, which mix up the real transactors with a bunch of fabricated decoys so that outside observers struggle to pinpoint the true source of the funds being moved. The use of such privacy tech is obligatory and enabled by default with Monero, for better and for worse.

Privacy has many legitimate uses, including preserving an individual's basic financial dignity in a world where such information is a form of potentially coercive power. But financial regulators (and as a result, also crypto exchanges) tend to view privacy features as something that raises the amount of effort they need to perform their required duties, or worse, that they're concealing illegal activity. On that front, Monero is a coin that regulators and enforcement (correctly) believe is frequently used by criminals.

That reputational problem frequently encourages both crypto exchanges and financial institutions to eschew dealing with Monero at all, likely capping its upside. After all, if investors can't buy a coin without jumping through a lot of hoops, most simply won't, and that is a big problem here.

Nonetheless, if capital holders really desire access to financial privacy, and that privacy actually works, regulatory obstacles probably won't stop every single investor from buying assets like Monero. And if privacy proves to be necessary to avoid getting targeted for financial exploitation of some kind in the future -- an uncomfortable but plausible possibility -- there could still be a large amount of demand for Monero from here, boosting its price.

XRP's regulatory fight is in the past

XRP is the native coin of the XRP Ledger (XRPL), which was developed by Ripple for the purpose of marketing to financial institutions and institutional investors, as well as to currency exchange houses and money transfer businesses. Compared to Monero's piddling market cap of $7.9 billion, XRP is a giant, worth $115 billion. That means it already has the size it needs to credibly transact in the volumes of capital that its target users need.

In terms of its capabilities, the XRPL is tightly interlinked with a suite of financial services that Ripple offers to make managing and sending money easier. For instance, XRP is used as a bridge currency in its On-Demand Liquidity platform, which clients can use to process and trace cross-border transactions in very short periods and for very low fees. To sweeten the pot even more for potential customers, the XRPL also has institutional-grade regulatory compliance features, which cut down on the risk of running afoul of anti-money laundering (AML) regulations, among others.

What's more, on Aug. 7, the Securities and Exchange Commission (SEC) filed to dismiss its appeal in the Ripple Labs case, which had started as a result of allegations that Ripple had made an unregistered securities offering when it launched XRP. Since then, the XRPL's legal bill of health has been cleared of its longest-running overhang. In other words, the biggest barrier to the platform being adopted by risk-averse big banks is now gone.

Therefore, if your goal is maximizing the odds that your $3,000 stays easy to hold in a typical crypto exchange or brokerage account and easy to exit in the future, XRP is by far the better choice today, and that's before even starting to get into its success in its niche so far, or Ripple's future plans to build out the XRPL further. Monero's regulatory problems are closer to just starting than to resolving, and, as useful as privacy is, its lack of concessions to appease lawmakers and regulators is very likely to be an persistent problem that prevents new capital from flowing in and increasing the coin's price.

Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends XRP. The Motley Fool recommends Monero. The Motley Fool has a disclosure policy.