In thrilling news for the cryptocurrency community, San Francisco-based fintech startup Ripple is gearing up to introduce its own U.S. dollar-backed stablecoin on the Ethereum and XRP Ledger, with the hopes to compete with Tether (USDT) and Circle’s USDC for a slice of the market share.

Ripple Joins $150 Billion Stablecoin Fray

Ripple, still fighting a lawsuit brought by the United States Securities and Exchange Commission, is planning to debut a stablecoin pegged to the price of the U.S. dollar “later this year”.

The yet-to-be-named crypto stablecoin will be 100% backed by U.S. dollars, short-term U.S. government treasuries, and “other cash equivalents,” Ripple said in a press release.

While the stablecoin will initially be issued on Ripple’s institution-focused XRP Ledger and Ethereum blockchains, there are “plans to expand to additional blockchains and decentralized finance protocols and apps over time.”

“Issuing our stablecoin on the XRP Ledger and Ethereum will serve as a pivotal entry point to unlock new opportunities for institutional and DeFi use cases across multiple ecosystems,” Ripple President Monica Long posited. “Bringing a trusted stablecoin onto XRPL will drive more adoption and development, contributing to a vibrant ecosystem.”

USDT and USDC are the current dominant USD-pegged stablecoins. Ripple pinned the stablecoin market’s current value at around $150 billion, which the company expects to skyrocket to $2.8 trillion by 2028.

Ensuring Compliance And Transparency

Ripple Chief Technology Officer David Schwartz indicated that the company had mulled launching a stablecoin much earlier. However, after studying the market and evaluating various economic factors, Schwartz says launching one in 2024 makes more strategic sense:

“We think we’re uniquely positioned to have a competitive entry in that market,” he posited. “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.”

Ripple revealed that it will publish monthly attestations of its holdings that back the stablecoin, with a third-party accounting firm performing audits. The company’s reserves will be held by U.S. banks. Schwartz further noted that Ripple intends to emulate USDC’s compliance-first mindset with its stablecoin:

“We’re looking to grab market share. We’re not looking to finesse a couple of extra decimal points by taking risks with other people’s money. Our balance sheet is rock solid,” he added.

In the announcement, Ripple observed that it has a “growing license portfolio in key regions around the globe,” which sets it apart as a transparent and reliable option in the crowded stablecoin sector.

Implications For XRP

As for the specific use cases of the stablecoin, Schwartz said he thinks it will be attractive to small and medium-sized enterprises and banking institutions.

“I really hope we can drive enterprise-grade institutional adoption of the stablecoin, which I think has been a little bit lacking both because of regulatory issues and the lack of someone to package something together as a product, he explained. “We’ll have a leg up because of our compliance.”

The new stablecoin is also expected to complement the ecosystem’s recently unveiled natively-built automated market maker (AMM) protocol. According to Schwartz, the stablecoin will create liquidity and grab volatility and arbitrage opportunities between multiple assets.

With a key focus on transparency and regulatory compliance, Ripple’s foray into the stablecoin market marks a strategic effort to expand its product offerings and boost the utility of the XRP ecosystem, which could ultimately turbocharge the price of the token to fresh all-time highs.

XRP is trading for $0.60 at the time of writing, a +4.58% change on the day.

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Filed under: Bitcoin - @ April 4, 2024 6:24 pm