Ripple, the issuer of XRP, has announced its intention to launch a U.S. dollar-backed stablecoin, aiming to compete with established players like Circle and Tether over the next five years.
The stablecoin, which will initially be issued on the XRP Ledger and Ethereum blockchain, is yet to be named. According to Ripple’s chief technology officer David Schwartz, it will be referred to as the “Ripple stablecoin” for the time being.
Ripple believes that the stablecoin market, currently valued at $150 billion, has room for expansion, projecting it to exceed $2 trillion by 2028. With only two dominant players, Ripple sees an opportunity to become a significant player, particularly in the decentralized finance (DeFi) sector.
The stablecoin will be pegged 1:1 to the U.S. dollar and backed by U.S. dollar deposits, short-term U.S. government Treasurys, and other cash equivalents. Ripple plans to focus on compliance, competing directly with issuers like USD Coin (USDC).
Ripple plans to have its reserve assets audited by a third-party accounting firm and will publish monthly attestations. This approach aims to address concerns similar to those faced by Tether in its early days regarding fund security and reserve transparency.
Despite potential concerns, Ripple leverages its credibility, track record, and strong balance sheet to enter the stablecoin market confidently. Schwartz asserts that Ripple has a credible claim to be a top player in the space.
The introduction of the Ripple stablecoin complements Ripplenet’s services, offering non-bank payment companies additional liquidity options beyond XRP. Moreover, it synergizes with Ripple’s recently launched automated market maker (AMM), facilitating liquidity provision and capturing arbitrage opportunities across assets.
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