The stablecoin of Ripple, Ripple USD (RLUSD), the company behind the XRP cryptocurrency, will be launched “in weeks,” said Brad Garlinghouse, CEO of this company.
That statement from Garlinghouse was reported by NoticiasVE on September 9, 2024, so the arrival of RLUSD to the cryptocurrency market would be increasingly closer.
1:1 parity of the RLUSD stablecoin with the US dollar
RLUSD would guarantee its peg to the US dollar through a backstop system based on cash deposits, short-term US Treasuries and other cash equivalent instruments.
Ripple announced its stablecoin at the beginning of April 2024 and, although the company did not explain where it will store the assets that will function as a reserve, in June 2024 it notified its partnership with Standard Custodya digital asset custody company.
Standard Custody employs a segregated account security method for each client on the blockchain. This means that each client’s funds would be separate and can be audited and tracked on the public network.
In addition, this company uses technology that includes end to end encryption and secure cryptographic keys. Unlike traditional cold storage, which may require manual operations, Standard Custody employs hardware and encryption to protect assets without human intervention. This security approach aims to minimize the risk of human error and insider attacks.
What they did state from Ripple is that it will carry out periodic audits by an external accounting firm, publishing reports that certify the existence and stability of its reserves. This is intended to help reassure users of this stablecoin, so that they can safely redeem RLUSD for real dollars whenever.
Multi-chain launch of Ripple stablecoin
In principle, the stablecoin RLUSD will be based on both Ripple’s network, the XRP Ledger, a first-layer blockchain, and Ethereum (ETH).
However, as NoticiasVE reported, Ripple plans to expand its stablecoin to other networks. The choice to issue RLUSD on Ethereum, one of the most used ecosystems in decentralized finance (DeFi), could promote adoption and interoperability at RLUSD.
Being a token that uses the ERC-20 standard, RLUSD will be able to easily integrate with decentralized applications (dApps), decentralized exchanges (DEXs), financial lending platforms and protocols DeFi existing in the network co-founded by Vitalik Buterin. The ERC-20 standard is flexible enough to adapt to multiple use caseslike tokens utility, governance, stablecoins and representative assets. This has allowed its adoption in different industries, from finance to video games. RLUSD intends to take advantage of this feature to facilitate its adoption.
Despite the advantages, Ethereum is also known for its high transaction costs (gas fees), especially in times of congestion.
However, Ripple claims that its stablecoin can be sent “globally in near real time with minimal fees and without the need for a bank account.”
How will RLUSD compete against USDT or USDC?
The current market for stablecoins that replicate the value of the dollar is dominated by the company’s Tether cryptocurrencies, USDT, and Circle’s USDC. Are stablecoins They are the two with the highest market capitalization, according to data from CoinMarketCap.
In a recent statement, Ripple indicated that RLUSD is not designed solely for individual users, but would focus on solving the needs of companies and institutions. This would include “cross-border and international payments, treasury management and other corporate processes.”
In addition, according to the announcement, RLUSD would especially target markets in regions such as APAC (Australasia, East Asia, South Asia and Southeast Asia), the European Union and Australia.
In this sense, USDT already has a strong positioning in Asian countries, such as China and South Korea, as well as in Latin America, Nigeria, in Africa, and Turkey and Russia. For its part, Circle has significant adoption in the United States and European countries.
Along with 40 other licenses qualifying to issue RLUSD, Ripple plans to issue RLUSD under a New York State trust license following the acquisition of Standard Custody. These licenses are regulatory permits that companies must obtain to operate legally in the markets where they wish to offer their stablecoins. Thus, they guarantee that issuance and operation activities comply with regional financial laws and regulations.
This fiduciary license would imply a “more robust strategy” than issuance through a money transfer license (MTL) like those held by Circle and Tether, according to Ripple. Fiduciary licenses, such as those granted by the New York Department of Financial Services (NYDFS), require institutions to maintain stricter risk management practices and meet higher financial requirements.
According to New York Department of Financial Services (DFS) guidelines, stablecoin issuers, like Ripple, must maintain reserves equivalent to 100% of the nominal value of stablecoins in circulation.
These reserves must be composed of low-risk and highly liquid assets, which would ensure optimal management and transparent reservations.
Ripple stablecoin testing phase continues
In movements linked to the testing stage of your stablecoinNovember 22, 2024 Ripple issued 10,500,000 million RLUSD. Moments later, he distributed 10 million of those tokens of RLUSD in 4 unknown addresses.
Days before, another operation linked to the tests of Ripple in which he burned more than 31,000,000 RLUSD.
Regarding the total issuance of RLUSD there are contradictions. For example, ETH Eplorer states that the total supply is 420 billion. However, in Ether Scan that number is 34 million.
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A factor that could impact the circulation of RLUSD could be the burning of these tokens carried out by the team working on testing the Ripple stablecoin.
On the other hand, on October 19, 2024, Ripple confirmed the exchange of cryptocurrencies in which the stablecoin RLUSD, as reported by NoticiasVE. Among them will be Uphold, Bitstamp and Bitso.
So, given that CEO Ripple affirmed the early insertion of RLUSD and the constant testing done by the team behind this stablecoina new stablecoin would be inserted into the market to dispute the dominance of USDT and, secondly, USDC.