Cryptocurrency startup Ripple has entered the stablecoin market, which is valued at $150 billion, by launching its own digital currency tied to the U.S. dollar. According to Ripple, the stablecoin will always be backed by an equivalent amount of assets, including U.S. dollar deposits, U.S. government bonds, and cash equivalents, held in reserve by the company. Ripple plans to provide monthly attestation reports to account for its reserves, but it has not disclosed the auditing firm responsible for this task.
1/ The stablecoin market is booming – around $150B today, and projected to soar past $2.8T by 2028. There's a clear demand for trust, stability, and utility.
That's why later this year we’re launching a stablecoin pegged 1:1 to the USD on the XRP Ledger and Ethereum.…
— Ripple (@Ripple) April 4, 2024
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Expansion plans
Initially, Ripple will introduce its stablecoin in the United States, but it remains open to offering similar products in other regions such as Europe and Asia. This move puts Ripple in competition with established stablecoin giants like Tether, the issuer of the largest stablecoin USDT, and Circle, the issuer of USDC. In addition, PayPal, a major payment company, has also launched its own stablecoin called PayPal USD, which is backed by U.S. dollars and issued by Paxos, a cryptocurrency firm.
Ripple’s CEO remains bullish on stablecoin market potential
Despite the existing competition, Ripple’s CEO, Brad Garlinghouse, remains confident about the company’s entry into the stablecoin market. He believes that the market will evolve and expand significantly in the future. Ripple decided to introduce its stablecoin in response to incidents involving other stablecoins, such as Tether’s USDT and Circle’s USDC, losing their peg to the U.S. dollar. In 2022, USDT experienced a temporary loss of its $1 peg due to market instability caused by the collapse of terraUSD, an algorithmic stablecoin. Similarly, USDC briefly fell below $1 in 2023 when it was revealed to have exposure to the collapsed Silicon Valley Bank.
Critics have raised concerns about the reserves backing Tether and questioned the company’s ability to withstand a “bank run” due to insufficient capitalization. Tether maintains that its token is fully backed by high-quality reserves and has always been able to meet withdrawal demands, even during challenging times. Garlinghouse noted that U.S. regulators have some uncertainty regarding the current market leader without disclosing its identity. He highlighted that Ripple is a regulated institution with licenses in various countries, including New York, Ireland, and Singapore.
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