Stablecoins in Focus
Jack McDonald, SVP of Stablecoins at Ripple, delivered a 60-second definition of stablecoins as Ripple continues testing its stablecoin, RL USD,
“Stablecoins, as the name implies, are digital tokens that are designed to less volatile than other types of cryptocurrencies or digital assets. There are different types of stablecoins. Some are backed by other cryptocurrencies and are going to be inherently more volatile while others are designed to be more stable and those are the ones that are really backed by government-backed securities or sovereign-backed securities.”
Jack McDonald added,
“So let’s think about a US dollar or euro or a Japanese Yen. You give me a dollar or a euro, I give you a digital token representing that dollar or euro. […] You can invest with it, you can save it, you can use it as a store of value. And at the end of the day, when you want that dollar or euro back, you give me the token, I give you the euro. You have the confidence that it’s stable, it’s retained its value, and it has the same value on the way out as it did on the way in. That’s why stablecoins are stable.”
Ripple’s Stablecoin: Ripple USD
On August 9, Ripple announced the private beta launch of Ripple USD (RL USD) on the XRP Ledger and Ethereum mainnet. Notably, Ripple stated that RL USD had not yet received regulatory approval. RL USD will be valued 1:1 to the US dollar and 100% backed by US dollar deposits, short-term US government treasuries, and other cash equivalents.
Based on Jack McDonald’s definition of stablecoins, investors cannot expect profits if the value on the way out will be the same as the value on the way in. Yet the SEC targeted Ripple’s plans to launch a stablecoin in April 2024, labeling it as the issuance of a new unregistered crypto asset. This is despite dollar-backed stablecoins likely to fail Howey’s third prong, the expectation of profit through the effort of others.
The SEC’s April 2024 filing could be the reason for Ripple advising it had not yet received regulatory approval. The final judgment ordered Ripple to act within the boundaries of US securities laws.
Will the SEC approve RL USD?
Disapproving RL USD could trigger another legal battle between Ripple and the SEC. However, the assets backing RL USD may undermine the SEC’s argument, possibly boosting XRP demand. Ripple is targeting the US cross-border payment industry, from which it has been largely absent since the SEC’s charges in December 2020.
What the Experts Say
FXCintelligence, a leading provider of cross-border payments data and intelligence, commented on Ripple’s plans for the US market, saying,
“As it faces the prospect of a post-lawsuit future, Ripple has already begun to re-engage with the cross-border payments industry, particularly in the US where only 10% of its business is located at present. The company currently has a very small share of flows in the global cross-border payments market, which overall totaled $190.1tn in 2023.”
