- Ripple announced its plan to launch a stablecoin.
- The new digital currency will be pegged 1-to-1 to the US dollar.
The Ripple Stablecoin
Ripple, the company behind XRP, unveiled its plan to launch its own stablecoin anchored to the price of the US dollar. It will be backed by the total value in US dollars of the company’s bank deposits, US government bonds, and cash equivalents held in reserve.
Although it’s yet to name an auditing firm that will monitor its reserves, Ripple said their status will be disclosed to the public via monthly attestation reports. The stablecoin is initially eyed for a US rollout, and with potential expansion in Europe and Asia probably based on the Euro and a dominant fiat currency within Asia.
The new digital currency of Ripple will go head-on against established giants in the industry like Tether’s USDT and Circle’s USDC. Recently, payments powerhouse PayPal also introduced its stablecoin called PayPal USD, which is issued by Paxos. So, that’s another one in the mix.
Ripple’s Reason
Ripple CEO Brad Garlinghouse told CNBC that they decided to make their own stablecoin in response to the “de-pegging” of Tether and Circle’s tokens against the US dollar. It should be noted that USDT temporarily went out of synchronization with USD in 2022 in the aftermath of the TerraUSD collapse. Meanwhile, USDC suffered the same fate in 2023 when investors flocked to withdraw their holdings after it was revealed that Circle kept some of its funds in the failed Silicon Valley Bank.
The Ripple boss boldly proclaimed that they were not worried about the existing competition in the space. He also suggested that the current leader in the stablecoin sector possessed a certain degree of uncertainty. Garlinghouse didn’t drop any names but it was clear that he was referring to Tether.
For context, some analysts have been questioning the veracity of Tether’s reserves. Doubts were cast out as well about the company’s capability to survive in the event of a bank run.
Despite that, the USDT issuer has assured the public that they are sufficiently backed by quality reserves and it never had any trouble with its withdrawals even in times of market distress. To date, Tether’s USDT holds a market cap of $106.17 billion compared to XRP’s $32.61 billion overall valuation.
The Ripple v. SEC Lawsuit
Against the backdrop of Ripple’s progress is the looming verdict of its case against the US Securities and Exchange Commission (SEC) going back to 2020. The charges stemmed from the alleged breach of the XRP issuer of security laws.
Last year, Ripple got a partial victory when the presiding judge ruled that XRP is not a security, but the nature by which it was sold to institutions constituted the sale of securities. As a result, the regulator is seeking a $2 billion reparation out of the company’s sale of $728.9 million tokens to institutional investors.