Key Takeaways
- Ripple is entering the stablecoin market, launching a US dollar stablecoin backed 1-to-1 by assets such as US dollar deposits, government bonds, and cash equivalents.
- The stablecoin’s reserves will be transparent through publicly available monthly attestation reports, although the auditing firm is undisclosed.
- This move challenges stablecoin giants like Tether, Circle, and even PayPal.
Ripple, creator of XRP Ledger (XRPL), announced the upcoming launch of its stablecoin pegged to the US dollar. This digital currency will be backed by a reserve of US dollars held by Ripple, including bank deposits, government bonds, and similar assets.
While the cross-border payments company has yet to reveal the specific auditing firm, they plan to ensure transparency through monthly public reports verifying the status of the reserves. Initially, the stablecoin will target the US market, with probable expansions to Europe (likely pegged to the Euro) and Asia (likely pegged to a dominant local currency).
Stablecoin Sector
Ripple’s stablecoin will directly compete with industry giants such as Tether’s USDT and Circle’s USDC. Furthermore, PayPal recently entered the sector in 2023 by launching its own stablecoin, PayPal USD (PYUSD).
Why Is Ripple Issuing A Stablecoin?
Ripple CEO Brad Garlinghouse cited concerns about the stability of existing stablecoins as a reason for their own launch. He specifically mentioned instances where Tether’s USDT and Circle’s USDC briefly lost their peg to the US dollar.
For context, USDT faced de-pegging in 2022 following the TerraUSD collapse; USDC experienced similar issues in 2023 due to investor withdrawals after news of Circle’s exposure to Silicon Valley Bank’s failure.
Ripple Lawsuit
In light of the company’s advancements, there’s the pending outcome of its legal battle with the US Securities and Exchange Commission (SEC), dating back to 2020. The allegations revolve around the purported violation of security laws by the XRP issuer.
In a partial win for Ripple last year, the court determined that XRP itself was not a security. However, the judge ruled that specific sales of XRP to institutional investors did qualify as unregistered securities offerings. Consequently, the SEC is seeking $2 billion in disgorgement from Ripple related to these $728.9 million institutional sales.
