Ripple Set to Introduce Stablecoin Tied to US Dollar, Targeting Competition Against USDT and USDC
Mitchell Nixon
Ripple, the issuer of XRP, has revealed intentions to introduce a stablecoin backed by the United States dollar, aiming to rival Circle and Tether for a share of the market in the coming five years.
Ahead of this announcement, Ripple’s Chief Technology Officer, David Schwartz, was interviewed, who discussed plans for the stablecoin’s initial issuance on both the XRP Ledger and the Ethereum blockchain.
“It’s funny that the question you ask, we don’t have an answer to yet. What’s the ticker going to be, and what we’re going to call it? You’re just going to have to call it the Ripple stablecoin for now,” Schwartz stated.
Despite uncertainties regarding its name and ticker symbol, Schwartz emphasised the necessity of diversifying the stablecoin ecosystem, citing its projected growth to over $2 trillion by 2028. He believes there’s room for additional major players in the market, particularly within the DeFi sector.
Ripple intends for its stablecoin to maintain a 1:1 ratio with the U.S. dollar, with plans to secure the tokens through U.S. dollar deposits, short-term U.S. government Treasurys, and other comparable cash equivalents. According to Schwartz, Ripple aims to follow Circle’s emphasis on regulatory compliance and likely will vie with the USD Coin (USDC) issuer.
“Our angle is going to be very ‘compliance-first.’ We’re very transparent about how the assets are backed, so we’re kind of going to be directly competing against USDC.”
When asked about Ripple’s strategy to support the stablecoin with dollar deposits, U.S. Treasurys, and cash equivalents, Schwartz emphasised, “We’re looking to grab market share. We’re not looking to finesse a couple of extra decimal points by taking risks with other people’s money.”
The reserve assets will undergo auditing by an independent accounting firm, with Ripple committing to releasing monthly attestations. Schwartz likened this process to the initial stages of Tether’s (USDT) stablecoin, during which sceptics frequently raised concerns about the issuer’s potential for misappropriating funds and the reliability of its reserve confirmations.
“Initially when Tether first launched, a big concern was whether these guys would run off with all the money because they’re very incentivised to do that. Then, after a while, ‘you’re like, wait a minute, these guys have a long-term business,’” Schwartz remarked.
The Chief Technology Officer of Ripple further noted that the prospect of introducing a new stablecoin capable of drawing in substantial sums, ranging from hundreds of millions to tens of billions of dollars, naturally gives rise to such apprehensions. Leveraging its credibility, established presence in the industry, and robust financial standing, the company aims to carve out a place in the stablecoin market.
“I think we have a credible claim to be in the conversation near the top. If at the end of two years, we’re number three, but the market has grown to 10 times what it is today, that’s still pretty good,” Schwartz stated.
In the same interview, Schwartz was questioned about Ripple’s interest in offering a stablecoin, given that XRP remains positioned as the token for its real-time gross settlement system, currency exchange, and remittance network, primarily serving financial institutions.
Schwartz explained that Ripplenet facilitates transactions for non-bank payment companies using XRP for transparent payments. However, there are markets where these firms cannot access using XRP or supplement liquidity.
“Having multiple paths to give customers a better experience means you have more customers. If we only did things with XRP, then where XRP wasn’t available, we would just have to tell a customer no,” Schwartz clarified.
The introduction of a Ripple stablecoin complements the ecosystem’s recently launched automated market maker. Schwartz noted that the stablecoin would enhance liquidity and capitalise on volatility and arbitrage opportunities across various assets.