Ripple Announces Stablecoin Coming to XRP Ledger: Insights and Implications

Ripple Announces Stablecoin Coming to XRP Ledger: Insights and Implications
  • Ripple announces plans to launch a new fully asset-backed US dollar-pegged stablecoin later this year on XRP Ledger and Ethereum.
  • Ripple says it expects the stablecoin market to grow almost 20-fold by 2028, with its new stablecoin encouraging increased enterprise adoption.
  • Doubters of Ripple’s shift in strategy suggest it’s a last ditch attempt to save a dying company whose business model has failed.

Ripple, the company behind the XRP cryptocurrency, has announced plans to launch a US dollar-pegged stablecoin on the XRP Ledger and the Ethereum blockchain later this year. Ripple said the stablecoin will be 100% backed by US dollar deposits, short-term government treasuries, and other cash equivalents.

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

The company said its stablecoin will offer a safer, more trustworthy and more compliant alternative to established US dollar-pegged stablecoins, like Tether and USDC. 

Aspersions have been cast over the motivations behind this shift in strategy, with some crypto watchers suggesting it may be more about fundraising than anything else—perhaps indicating that Ripple’s existing business model may be running out of steam.

Related Kraken Australia’s Managing Director Foresees A Turning Point: How Stablecoins And Strategic Policies Could Spark A Crypto Demand Surge 

Ripple: We’ll Offer A Regulated Stablecoin For Enterprise

Ripple expects the US$150 billion stablecoin market to grow almost 20-fold to US$2.8 trillion (AU$4.3 trillion) by 2028. The company believes the best way for it to get a cut of this action is to provide an “enterprise grade” stablecoin for use by financial institutions.

Ripple CEO, Brad Garlinghouse, said the company is uniquely well-positioned to create this “enterprise grade” stablecoin because of its long history of trying to integrate crypto into traditional financial institutions:

This is a natural step for Ripple to continue bridging the gap between traditional finance and crypto…Institutions entering this space are finding success by partnering with compliant, crypto-native players and Ripple’s track record and resiliency speaks for itself, as we launch new products and acquire companies through multiple market cycles.

Brad Garlinghouse, Ripple CEO

According to Ripple, the advantages of its new stablecoin mostly relate to improved transparency and regulatory compliance — the company plans to release monthly “attestations” of the assets backing the stablecoin and Ripple has generally taken a more serious approach to regulatory compliance than most crypto companies throughout its history.

A high-quality USD stablecoin on the XRPL – with its decentralized exchange and features like issued currencies, auto-bridging (that uses XRP as the native currency to facilitate trades between other assets), and the AMM — will be a gamechanger for users and devs. https://t.co/uGC72bosfM

— David “JoelKatz” Schwartz (@JoelKatz) April 4, 2024

Monica Long, Ripple’s President, said that the introduction of a native stablecoin on the XRP Ledger means some of the network’s native functionality can be used more effectively to drive growth and innovation:

The XRP Ledger’s native capabilities, including a decentralized exchange and automated market maker, were built to utilize XRP as the bridge asset. Bringing a trusted stablecoin onto XRPL will drive more adoption and development, contributing to a vibrant ecosystem.

Monica Long, Ripple President

Is This Just A Cash Grab By A Failing Business?

Not everyone is convinced that Ripple’s planned stablecoin isn’t simply a last ditch effort to revive a failing company.

Writing for CoinDesk, Daniel Kuhn claimed that Brad Garlinghouse had effectively “declared the death of XRP” when he announced plans for a stablecoin – Kuhn considers the announcement tantamount to an admission that the company’s business model has failed.

And what exactly was that business model? Well, Ripple has for years been partnering with large banks and other financial institutions all around the world hoping to get them to use its services, like its On-Demand Liquidity (ODL). 

But so far this hasn’t really worked out. Ripple has succeeded in making plenty of partnerships, but beyond the partnership announcement and some internal trials, these haven’t really amounted to substantial real-world adoption.

Another key plank of its business model has been large scale sales of XRP to institutional buyers. But since a court ruling found these sales were effectively unregistered securities sales, that revenue source has also dried up.

Related: Judge Grants SEC Request, Extends Deadline in Ripple Case 

So, Kuhn argues, this pivot into stablecoins may be a ploy to raise some much needed funds. Despite being a crowded and competitive market, stablecoins can also be very lucrative, so it may be a good move by Ripple if they’re short of capital.

Wait, So You’re Saying XRP Isn’t A Stablecoin?

Of course this news will be surprising to many crypto investors for another reason entirely: they’d all but forgotten that XRP itself was not actually a stablecoin. Unlike other major cryptocurrencies, such as Bitcoin and Ethereum whose prices have exploded in the past 5 or 6 years, XRP currently sits at approximately the same price it was in June of 2018.

XRP’s price performance has been hampered by Ripple’s seemingly never-ending legal imbroglio with the SEC, which is still ongoing. But the failure to achieve widespread adoption of XRP-based financial services by financial institutions has also been an issue. 

So far the stablecoin announcement hasn’t made much of an impression in terms of price, with data from CoinGecko showing XRP was changing hands at the time of writing at US$0.59, up 2.7% on the day, inline with the overall crypto market which was up 2.3%.

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