Key Insights:
Ripple is soon going to launch its RLUSD stablecoin.
The coin is expected to boost Ripple's RWA future prospects and boost its usage in cross-border payments.
RLUSD will be introduced via two blockchains, Ethereum and XRP Ledger.
Ripple has also roped in several exchanges and market makers to provide support.
Ripple is finally gearing up to launch its much awaited XRP Ledger-based stablecoin named RLUSD or Ripple Ledger USD. The stablecoin is being launched with active support from partner organizations like exchanges, market makers, and other DeFi platforms.
The partners are Bitstamp, Uphold, Moonpay, Bitso, Independent Reserve, and CoinMENA. Ripple has also roped in two market makers B2C2 and Keyrock.
Ripple issuing a new crypto on its blockchain will surely tempt the SEC in filing a new case. The duo have already been at loggerheads even when the District Court of the Southern District of New York reduced the fine for Ripple and ended the SEC's claim of $2 billion.
The issue of a new crypto by Ripple could help the SEC double-down on its stance. However, the regulator might not find it easy this time.
Unlike the sales in 2013 when there was no law regulating such crypto sales, the FIT-21 law has given Ripple a way to escape the SEC's wrath. This time, Ripple just has to ensure that the RLUSD token supply does not concentrate in any single party's hand (individual or institution) beyond the prescribed limit of 20%.
This would help Ripple bypass the law and end up with CFTC to seek regulation clarity which wouldn't be as hard as the SEC since the former has been knowing to act more leniently.
Ripple sees multiple use cases for the RLUSD stablecoin beyond the obvious use cases such as providing liquidity, acting as a store of value, and for cross-border payments.
For a better market capture, Ripple has launched it on both Ethereum and Ripple's own XRP Ledger. The presence of RLUSD on Ethereum would provide Ripple with indirect access to all the EVM-based chains like Base, Optimism, Polygon POS, Polygon zkEVM, Arbitrum, Linea, Shibarium, and others.
Real World Asset tokenization has been a very rapidly growing market and Ripple does not want to miss the bus on it. Therefore, the RLUSD has been designed in a way to capture this nascent market.
Let us explain briefly how this works.
Firstly, Ripple is a major platform for cross-border transfers and even financial giants like JP Morgan have openly mentioned that they have been using it.
Secondly, the newly tokenized assets created in the RWA sector are expected to turn global which will then prompt large-scale investors like JP Morgan, Pension Funds, Sovereign Funds, and others to demand the ability to trade these assets.
Both these cases already present Ripple's XRP Ledger as the most trusted and suitable channel. However, XRPL missed something. To buy, sell and transfer these assets, no institution would prefer a volatile crypto like XRP and hence the need for a stablecoin was high.
This need would be fulfilled by RLUSD.
Most of the domination that we see today is from ERC-20 stablecoins, like USDT and USDC. Though they also exist on other chains, yet their major existence is on Ethereum. In this scenario launching an RLUSD as another competitor doesn't seem to be a wise decision.
But when we look at it from another angle, launching RLUSD on Ethereum makes perfect sense. See, Ethereum has a large set of users who do not interact with any other chain. If RLUSD is just launched on XRPL, it would miss onboarding these users.
The motive of launching RLUSD on Ethereum seems to attract new users to accumulate these cryptocurrencies and when they soon find Ethereum to be more expensive than XRPL, it would prompt them to move their assets to XRPL with a little assistance from Ripple.
Ripple would gain dual benefits from these. First, it would get an initial reaction, opinions, real-world testing data, and traction for RLUSD. Secondly, it will also prompt some users to jump to XRPL getting the blockchain some much-needed user-activity from these cross-chain transfers.
RLUSD is entering the markets with two very important lessons from stablecoins that failed in the past.
Terra's collapse would teach XRPL to avoid reliance on algorithms for backing stablecoins. Terra's USD collapsed in May 2022 when it de-pegged and was subsequently burned by users to cash out their funds. The fall of TerraUSD also led to the fall of Luna as the two were algorithmically linked.
BinanceUSD was a case of failure due to regulation. Before its collapse, BinanceUSD, or BUSD was the third largest stablecoin and a top 5 crypto by market cap.
However, it for engulfed in regulation as its co-creator Paxos was ordered to shut down operations in New York due to several "unresolved" issues. The crypto was then phased-off within a year by its creators.
RLUSD could learn the lesson of playing within legal boundaries from BUSD.
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