Ripple Plans Launch of US Dollar-Backed Stablecoin in Bid to Compete with Market Leaders
Summary:
Ripple has revealed plans to launch a US dollar-pegged stablecoin to compete with leading market players, Tether and Circle. Backed by US dollar deposits and short-term US government treasuries, the new stablecoin aims to diversify and strengthen the existing stablecoin ecosystem, estimated at a current value of $150 billion. CTO David Schwartz emphasized Ripple's commitment to transparent and compliance-first practices and sees the stablecoin enhancing Ripple's recent automated market maker by increasing liquidity and capitalizing on fluctuations and arbitrage opportunities.
Ripple, the well-known issuer of XRP, has disclosed its intention to introduce a stablecoin anchor to the US dollar, aiming to rival major market leaders such as Tether and Circle within the coming five years. In a pre-publication interview with Cointelegraph, Ripple's CTO David Schwartz explained their plans for the stablecoin, which is initially designed to operate on the XRP Ledger and Ethereum blockchains. The official name and the ticker for the new stablecoin are currently undecided, leading Schwartz to jokingly suggest referring to it as the 'Ripple stablecoin' for the time being.
Ripple has toyed with the idea of establishing a stablecoin for over a year, with Schwartz expressing the belief that the present stablecoin landscape could be more diversified and sturdy. He estimated the existing stablecoin market value at $150 billion and stated that there is room for more major contributors: “We predict a growth to more than $2 trillion by 2028, considering a market dominated by only two leaders. We don't believe this is a zero-sum game, especially in the DeFi sector."
The upcoming stablecoin from Ripple will be pegged 1:1 to the US dollar. Ripple plans to back its tokens with US dollar deposits, short-term US government treasuries, and other 'cash equivalents'. The company aims to embody Circle's pro-compliance approach and to match USDC: “We firmly believe in 'compliance-first'. We are sincerely transparent about asset backing, and therefore directly compete with USDC," said Schwartz.
Third-party accounting audits will verify the reserve assets. Ripple will publicize monthly attestations, mirroring the early days of Tether's USDT token, which faced skepticism over fund misappropriation and the validity of its reserve attestations. The challenges that come with launching a new stablecoin with an estimated appeal of hundreds of millions, billions, or tens of billions of dollars, are not unfamiliar to Ripple. Schwartz confirmed that the company would rely on its strong standing and successful history in the blockchain sector, as well as a solid balance sheet, to find its place within the stablecoin market.
While Ripple remains dedicated to XRP, which mainly caters to financial institutes as a real-time gross settlement system, foreign exchange, and remittance network, Schwartz highlighted that the company's network, Ripplenet, also services non-banking payment companies using XRP for transparent payments. The Ripple stablecoin, he added, would also enhance services for Ripple's recent automated market maker. He stated the stablecoin would increase liquidity while capitalizing on market volatility and arbitrage opportunities between various assets.
Published At
4/4/2024 4:09:47 PM
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