Yesterday, Ripple announced preparations for the launch of the RLUSD stablecoin. Announced a series of virtual currency exchanges that are preparing to go public, revealing that they will be issued under the Charter of the New York Trust Company.
When will I receive my publishing permit?
Curiously, the announcement did not state that it was “subject to regulatory approval”, unlike Ripple’s website. Perhaps everything is already cleared. Notably, the regulatory leader (NYDFS) appeared at Ripple’s Swell conference this week.
Ripple held a New York cryptocurrency license for eight years. In February, it acquired Standard Custody, which is licensed by New York Trust. Using a trust rather than a more permissive license provides greater protection for customer funds. However, virtual currency and money transfer licenses are more flexible for issuers.
Trust companies must obtain approval for all blockchains on which stablecoins are issued. To date, the New York State Department of Financial Services (NYDFS) has only approved the issuance of trust stablecoins in Ethereum and Solana. Therefore, the XRP Ledger includes review work by NYDFS.
So while Circle’s USDC is available on over a dozen blockchains, Paxos USDP and PayPal’s PYUSD are only available on Ethereum and Solana. Circle issues under the New York Virtual Currency and Transmitter License, not the Trust Charter.
How will RLUSD affect the use of XRP?
When Ripple first announced its plans for a stablecoin, the XRP community seemed concerned.
Our focus here is on functionality, not price fluctuations. Until now, XRP has had two important features. First, like other blockchains, it is the native token of the XRP Ledger. Therefore, the more popular the XRP Ledger becomes, the more utility XRP provides.
Another major use case is as an intermediary currency for cross-border payments. If someone wants to send money from Brazil to India, they will exchange Brazilian Real for XRP and XRP for Rupee. This means that only all currencies need to be quoted against XRP.
However, outside of the XRP Ledger, the US dollar often plays this role. Most currencies have their most liquid price against the dollar. A USD stablecoin should (hopefully) be a better intermediate currency as it is less volatile than XRP and has an off-chain reference price, making pricing more predictable.
However, that partially depends on the liquidity of Ripple’s stablecoin. Without liquidity, FX spreads will become wider, discouraging the use of FX. Sufficient liquidity in RLUSD should further encourage usage of the XRP Ledger.
Banks that have used Ripple solutions in the past have complained to Ledger Insights that the company is confusing Ripple solutions with using XRP as a customer, even though the bank does not use XRP. However, they generally praised Ripple technology.
Ripple’s payments experience with banks, money transfer companies, and more recently some central banks should mean that Ripple has a chance to help mainstream stablecoin payments. Therefore, the announcement of Ripple’s stablecoin could expand the use of the XRP ledger. However, despite its advantages, there is a lot of competition.
partner
Meanwhile, the crypto exchange partners Ripple announced for its stablecoin are Uphold, Bitstamp, Bitso, MoonPay, Independent Reserve, CoinMENA, and Bullish. Additionally, B2C2 and Keyrock act as market makers.
Ripple also includes former Federal Deposit Insurance Corporation (FDIC) Chair Sheila Baer, Partners Capital Vice Chairman and former CENTER Consortium CEO David Puth, and Ripple Co-Founder and Executive Chairman Chris Larsen. An advisory committee was announced. Mr. Puth is also the former CEO of CLS, a central counterparty (CCP) responsible for the settlement of trillions of dollars in exchanges every day (yes, every day!).
As we have written previously, stablecoin winners are likely to be those willing to share a portion of the interest income from their reserves with distributors.
Ledger Insights Research has released a report on bank-issued stablecoins and tokenized deposits featuring over 70 projects. Click here for more information.
