- Deloitte certified Ripple’s claims that it had enough assets backing the RLUSD stablecoins.
- To date, Ripple has $1.49 billion in reserves backing RLUSD, which has a circulating supply of 1.14 billion.
Ripple recently demonstrated it had sufficient reserve assets to cover the issuance of its USD-based stablecoin, RLUSD. An attestation from the independent audit firm Deloitte, released on March 26, confirmed that its custodian, Standard Custody Trust Company, LLC, manages reserves with a higher market value than the stablecoins in circulation.
RLUSD Supply and Reserve Assets
The “Big Four” auditor reported that RLUSD’s 1.54 billion and 1.5 billion units on February 19 and 27 were backed by $1.61 billion and $1.57 billion in assets, respectively. The assets consisted of US Treasury bills, government money-market funds, and deposit accounts at state or federally chartered institutions.
Deloitte noted that it conducted the audit in accordance with the American Institute of Certified Public Accountants (AICPA) standards. It involved obtaining evidence about the custodian’s assertion, as well as meticulous verification and assessment of the gathered data. The auditor assured that it had independently exercised due diligence in evaluating potential risks, fraud, or errors in the attestation.
Overall, Deloitte is confident that the evidence provided by Ripple’s custodian was sufficient to merit a reasonable basis for its opinion. With that, it guaranteed the veracity of its findings.
Fast-forward this Wednesday, Ripple declared 1.14 billion RLUSD in circulation backed by $1.49 billion in unaudited reserves.
Importance of the RLUSD’s Reserve Backing
Ripple issues the RLUSD stablecoin on both the Ethereum (ETH) and XRP Ledger (XRPL). The former supports 85% of the token.
An external backing asset is important for stablecoins like RLUSD. It provides the mechanism to maintain their 1:1 peg to the US dollar. Ensuring that every token in circulation is matched or exceeded by high-quality liquid assets significantly mitigates “bank run” risks that have previously plagued algorithmic stablecoins.
One prominent example that underscores the importance of this factor was the collapse of TerraUSD (UST) in 2022. Unlike the RLUSD, UST relied on a complex mint-and-burn mechanism tied to its sister token, LUNA, to maintain its peg to the US dollar.
Flaws in TerraUSD’s internal collateral design began to unravel when the stablecoin fell below its peg due to massive sell-offs. It was amplified by the simultaneous panic-selling of LUNA as the system automatically minted the token in an attempt to recover UST’s peg.
The event eventually led to LUNA’s hyperinflation, triggering a negative feedback loop with UST. The “death spiral” wiped out a combined $45 billion to $65 billion in direct value from both tokens.
