- Ripple will introduce a new stablecoin pegged 1:1 to the US dollar before the end of year 2024.
- The stablecoin is expected to help XRP thrive as it taps into the already existing $150 billion stablecoin market.
- Stablecoins make up the largest trading volume on all chains per Messary Research.
Ripple Labs announced On April 4, 2024, that they will introduce a new stablecoin pegged 1:1 to the US dollar. The stablecoin will be enterprise-grade, compliant, multichain-compatible, and 100% USD-backed.
This move will mark a significant milestone in their expansion into new verticals.
According to Ripple Labs, the move is aimed at extending “Ripple’s reach into both institutional and DeFi realms, diversifying use cases and enhancing our payments infrastructure, to bring the worlds of traditional and decentralized finance closer together.”
Krippenreiter, a crypto researcher, went into the details of how XRP will thrive when the new stablecoin launches.
What is a Stablecoin?
A stablecoin is a digital on-chain representation of an asset that exists outside the chain. The primary goal of issuing a stablecoin on a blockchain is to serve as a bridge between both worlds, assuring a stable exchange rate while vowing to stay reliable, lawful, & solvent.
According to the Ripple Labs press release, they have already designed a best practice for issuing a stablecoin on a blockchain, and it grossly differs from stablecoin minting on Ethereum.
On the XRP Ledger, stablecoin will be minted and managed by a trusted operator, making the process safe.
Impact on XRP
The global stablecoin market is massive, with USDT leading the pack and Ethereum being the most popular chain to issue such a stablecoin. Here are some facts and figures about stablecoins:
- Standing at a $153.69 billion total market cap, stablecoins have a 51.40% chain dominance. This means if stablecoins were to fail, their respective blockchains would suffer catastrophic damage in terms of value.
- Uniswap, the largest decentralized AMM on Ethereum has stablecoins as some of the top traded assets after ETH in terms of volume.
- According to Messari’s research on volume trends in 2024, stablecoins make up the largest trading volume on all chains.
Ripple Stablecoin Will Boost XRP-AMM
In terms of AMMs, stablecoins account for billions of dollars in daily volume. Since XRP is counterparty-risk-free, a Ripple USD-backed stablecoin to XRP-AMM-pair is likely to soon get to the top of the rankings.
XRPL AMM will potentially add buying pressure on XRP, potentially locking a significant amount on the AMM.
Looking at the XRPscan, an XRPL explorer, you can see that the amount of XRP in AMMs is at an all-time high with the largest pool (USDC/XRP) having over 341,000 XRP .
Total XRP Locked. Source: Xrpscan
Why a Ripple Stablecoin on XRPL is a Win for XRP
The blockchain researcher highlighted some key differences between Stablecoins and XRP in a bid to show how the upcoming stablecoin will not replace XRP but rather works side by side with it.
Stablecoins can never be neutral since they have a dependency on the issuer, an institution, or a certain jurisdiction. USDC, for instance, is directly dependent on Circle, the parent company.
XRP, on the other hand, is a globally neutral digital asset that is solely tied to the decentralized XRPL.
Krippenreiter also noted that every stablecoin has an issuer, which raises concerns about its reserve-backings. In case the counterparty is no longer trustworthy, the coin could depeg. We have already witnessed this with USTC on the fallen LUNC blockchain. XRP will be the only counterparty-free asset on the XRPL.
When it comes to transparency, audits, and attestations are the only ways we can check and trust any issuer’s off-chain reserve assets, but there is no way to know if the issuer is genuinely trustworthy.
XRP allows anyone to look at the most current ledger on XRPL to learn more about the supply.
There are multiple separate USD stables offered by various issuers on various chains & different AMMs, but the XRPL always has a single native currency & native DEX. For instance, Fantom blockchain recently partnered with Circle to launch USDC.e, a new stablecoin for bridging assets from Ethereum mainnet to Fantom blockchain.
This is fragmentation. While the fragmentation of stablecoins on other chains has helped them to grow, XRPL does not need these.
Krippenreiter states that XRP can bridge any asset on-chain via a method known as “Auto-Bridging”
Stablecoins work within the contracts defined by the issuer and can be created or burnt without total off-chain visibility.
Because XRP is not a stablecoin and has no need for backing, all new currency creation is up to consensus.
In addition to these factors, the recent movement by the world government to steer economies away from the dollar. Krippenreiter sheds light on the fact that USD-backed stablecoins are actually backed by a failing fiat currency that is surrounded by mistrust.
Final Thought
The stablecoin Ripple plans to launch will thrive. When Maker DAO launched the first stablecoin on Ethereum, DAI, ETH took off due to the huge amount of liquidity DAI brought. XRP’s rise will be rapid because, as opposed to Ethereum which was pioneering DeFi, XRP already has a $150 billion stablecoin market ready to tap from. This makes Ripple’s move to launch the Stablecoin strategic, more so in a bull market year.