Ripple, the technology company behind XRP, plans to launch a stablecoin. The dollar-pegged stablecoin will be initially available on the XRP Ledger and Ethereum blockchains.
Ripple says that the stablecoin will be published in 2024. USD deposits, US government bonds, and other cash deposits will be used as collateral. A third-party auditing firm will audit the collateral, and Ripple will publish a monthly report.
The stablecoin market has long been dominated by Tether’s USDT and Circle’s USDC. According to Ripple, the stablecoin market is worth $150 billion and is expected to grow to $2.8 trillion by 2028. Below is a thread on the subject from Ripple’s official X account.
1/ The stablecoin market is booming – around $150B today, and projected to soar past $2.8T by 2028. There's a clear demand for trust, stability, and utility.
That's why later this year we’re launching a stablecoin pegged 1:1 to the USD on the XRP Ledger and Ethereum.…
— Ripple (@Ripple) April 4, 2024
Ripple’s CTO David Schwartz says he and his team would have liked to launch a stablecoin earlier. “In hindsight, learning everything about the market and monitoring economic factors was wiser.” David also notes that launching a stablecoin makes strategic sense in 2024.
According to Schwartz, the rise in interest rates makes the stablecoin market attractive. He also takes a stand on regulation and says that using USDT is not an option for them, as there is so much uncertainty around it. Ripple has used USDC in the past, and Schwarz says nothing is wrong with USDC. “We just don’t want to rely on one option.”
US government bonds pay a 4-5 percent yield, depending on maturity. Companies that manage stablecoins make a lot of revenue by investing the USD collateral in this liquid market to earn yield. Ripple also wants a slice of this cake.
According to Ripple, there is plenty of room for new stablecoins. The concentrated risk of DeFi is a big problem, as almost all DeFi apps only use USDC or USDT stablecoins.
Ripple’s stablecoin has potential
Ripple believes that both businesses and consumers will respond positively to their stablecoin. According to the company, the new product can promote the institutional adoption of stablecoins, which has been very small due to regulation and the lack of the right product.
Ripple believes it has an advantage, especially among institutions, as the company closely follows US crypto-regulation. Ripple has previously been at odds with the US Securities and Exchange Commission (SEC). The SEC accused Ripple of raising $1.3 billion using XRP, which the SEC interpreted as an unregistered security.
However, in 2023, the court ruled that XRP was not an unregistered security. Part of the lawsuit is still pending, but Ripple will probably emerge victorious from the case without fines.
It will be interesting to see how Ripple’s stablecoin is received. Tether and Cricle have dominated the market for a long time, and there has been no clear challenger to the duo. Paxos came close with its BUSD stablecoin, but the SEC shut it down a year ago. Decentralized DAI is a smaller stablecoin.
Ripple may have the opportunity to act as a market disruptor and force Tether and Circle to improve their stablecoins.
Some XRP investors have wondered why the XRP price did not react to the news. This is because the stablecoin is not directly linked to the XRP token. XRP is not used as its collateral. Ripple’s stablecoin can theoretically increase the popularity of the XRP Ledger, but this is still far-fetched speculation.
Summary:
- Ripple plans to launch a stablecoin pegged to the US dollar.
- The stablecoin will initially be released on the XRP Ledger and Ethereum platforms.
- Ripple believes the stablecoin market will grow explosively in the next four years.