Ripple has announced its own foray into the $150 billion stablecoin market by launching a digital currency pegged to the U.S. dollar.
XRP-sister stablecoin will maintain a 1-to-1 backing with a corresponding value of U.S. dollar deposits, government bonds, and cash equivalents that Ripple has in reserve. The company has committed to transparency by issuing monthly attestation reports on its reserves, although it has not disclosed the auditing firm involved.
Ripple’s stablecoin will be initially available in the U.S., but expansions into other regions such as Europe and Asia could follow suite. This move places Ripple in direct competition with established stablecoin providers like Tether, the creator of USDT, and Circle, the issuer of USDC. This market has also seen entries from major corporations like PayPal, which introduced PayPal USD in partnership with Paxos.
Despite the crowded marketplace, Ripple CEO Brad Garlinghouse said “We think we’re uniquely positioned to have a competitive entry in that market. We have our presence both on the institutional side with our payments product, and on the XRP Ledger side, we have some entry into the DeFi section of the space. Those are kind of the two big buckets in which stablecoins are being used today.”
Garlinghouse added that the decision to launch a stablecoin was partly in response to the instability experienced by competitors’ tokens, such as Tether’s USDT and Circle’s USDC, which both saw their value deviate from their $1 peg during market tumults.
Tether, the largest stablecoin issuer with a market capitalization of $106.3 billion, maintains that its reserves are fully backed, though it faces scrutiny over the transparency and sufficiency of its reserves. Unlike Tether, Ripple highlights its status as a regulated entity with licenses in several jurisdictions, including New York, Ireland, and Singapore, adding a layer of trustworthiness to its stablecoin offering.
Moreover, Ripple aims to leverage its stablecoin to bolster its On-Demand Liquidity product, which facilitates rapid transactions between financial institutions using the XRP token as an intermediary. While Ripple has faced challenges in promoting XRP’s adoption among banks and payment firms, the introduction of a stablecoin is seen as complementary to the XRP ecosystem. This initiative responds to demand from the XRP community for a USD-backed stablecoin on the XRP Ledger.
The launch comes amidst Ripple’s ongoing legal battle with the U.S. Securities and Exchange Commission (SEC) over the sale of XRP tokens, which the SEC argues should have been registered as securities.
A recent court ruling determined that while XRP is not inherently a security, its sales to institutions were unlawful. Ripple anticipates a settlement in this case, with expectations of it being in the “millions.” However, the SEC is pressing for a near $2 billion fine against Ripple Labs, urging a New York court to assess the “severity” of the company’s alleged misconduct.
