Ripple Is Launching A Stablecoin To Compete With USDT and USDC

Ripple, the company behind XRP, has shown its intentions to introduce a stablecoin pegged to the U.S. dollar, aiming to start a competitive position against established players like Circle and Tether within a five-year timeframe.

In a pre-announcement discussion, Ripple’s Chief Technology Officer, David Schwartz, shared insights into the stablecoin’s roadmap, indicating its initial issuance on both the XRP Ledger and Ethereum blockchain platforms.

Schwartz humorously remarked on the absence of a decision regarding the stablecoin’s ticker symbol and official name, suggesting that it temporarily be dubbed the “Ripple stablecoin.”

Ripple Intends To Offer A Product That Competes Directly With The USDC

For more than a year, Ripple has been contemplating introducing its own stablecoin. Chief Technology Officer David Schwartz critiques the current state of the stablecoin market as lacking diversity and robustness.

With the market’s valuation pegged at $150 billion, Schwartz sees significant growth potential, projecting it to reach $2 trillion by 2028. He points out the dominance of only two major players, emphasizing that the market, especially within decentralized finance (DeFi), does not revolve around a single winner.

Ripple aims to introduce a stablecoin tied directly to the U.S. dollar at a one-to-one ratio. The backing for this digital currency will come from a mix of U.S. dollar deposits, short-term U.S. government securities, and other cash-like assets.

Drawing inspiration from Circle’s commitment to regulatory compliance, Ripple intends to offer a product that competes directly with the USDC, focusing on transparency and a compliance-first approach in how its stablecoin is supported.

Schwartz elaborates on Ripple’s strategy, highlighting the company’s intent to capture market share rather than seeking marginal gains through risky financial maneuvers.

Investments Ranging From Hundreds Of Millions To Tens Of Billions Might Be A Concern

A third-party accounting firm will conduct audits on the reserve assets, with Ripple committing to release monthly attestations. Reflecting on the skepticism that greeted Tether’s USDT token at its inception, Schwartz highlighted the initial fears that Tether’s operators might run off with the funds due to strong financial incentives.

However, perceptions shifted as Tether established itself as a long-term player in the market. Schwartz pointed out the inevitable concerns that arise with the introduction of a new stablecoin, potentially attracting significant investments ranging from hundreds of millions to tens of billions of dollars.

Ripple aims to mitigate these concerns through its established reputation, proven track record in the cryptocurrency industry, and a robust financial foundation, as it finds its way into the competitive stablecoin sector.

Expressing optimism about Ripple’s position in the stablecoin market, Schwartz speculated on a scenario where Ripple emerges as the third-largest stablecoin provider in a market that has expanded 10x, considering this outcome to be a considerable success.

The New Stablecoin Will Provide Liquidity And Capture Volatility

Ripple was inquired about its motivation for introducing a stablecoin when XRP is already being used in its real-time gross settlement system, which includes currency exchange and remittance services, mainly for financial institutions.

David Schwartz responded that while Ripplenet employs XRP to facilitate transparent payments for non-bank payment companies, there exist markets these entities cannot penetrate with XRP alone or where additional liquidity is needed.

Schwartz elaborated on the strategy, pointing out that offering various solutions to improve customer experiences can lead to an expanded client base. He highlighted the limitations of relying solely on XRP, stating that in scenarios where XRP is not an option, he would end up needing to decline customer requests.

Furthermore, the launch of a stablecoin by Ripple is anticipated to enhance the functionality of the network’s recently introduced automated market maker. According to Schwartz, the stablecoin is expected to bolster liquidity while seizing volatility and arbitrage chances across a spectrum of assets, enriching Ripple’s ecosystem.