The cryptocurrency XRP’s creator, Ripple, revealed plans to introduce “XRP-C,” a stablecoin. This action affects the XRP ecosystem as a whole. Ripple’s decision to introduce a stablecoin later this year has been one of the major announcements for the digital asset market. The company intends to challenge the industry when it launches a US Dollar-pegged asset. However, several individuals in the digital asset space have questioned what a Ripple stablecoin means for XRP.
The market has been apprehensive about what XRP’s position inside the Ripple ecosystem would entail if a stablecoin option were available overall. Consequently, Ripple needs XRP to make cross-border payments. The community now worries about whether this new asset can replace it in those operational aspects.
XRP Rises on News That Ripple is About to Release a Stablecoin Backed by US Dollars
In 2022, the stablecoin market was largely destroyed. Following the demise of the well-known cryptocurrency Terra and other algorithmic stablecoins, investors evidently looked for security in asset-backed tokens or other cryptocurrency assets viewed as value stores, like Ethereum (ETH-USD) and Bitcoin (BTC-USD).
Ripple’s introduction of a stablecoin backed by the US dollar indicates the ongoing shift toward these assets. When storing money for a short time, investors demand stability, and assets backed by dollars perfectly match this description.
Over time, more transactions utilizing this token may increase XRPL usage. Launching a stablecoin for XRP strengthens it as one of the most significant networks for institutional money transactions. It’s a long overdue and wise decision. The Ripple team probably wanted to hold off on making this announcement until the regulators had provided more clarification.
Third-party accountants will audit Ripple’s dollar-backed stablecoin, and the company will provide monthly attestation reports. XRP’s market dominance and devoted user base will help this stablecoin secure a sizable share against competitors.
What will Happen to XRP When Ripple Stablecoin Becomes Available?
One of the most intriguing assets on the market in 2024 is Ripple (XRP). Even if it hasn’t done as well as some of its competitors, its industry-wide significance and the company’s ongoing legal battle with the US Securities and Exchange Commission (SEC) have kept hope that things will soon improve.
Concerns have been raised over XRP and Ripple’s recently revealed stablecoin. Crypto researcher Krippenreiter addressed some of the worries on X (previously Twitter), since many had expressed alarm.
Krippenreiter specifically emphasized the fundamental distinctions between stablecoins and XRP. He added that XRP will continue to have value within the Ripple ecosystem because of these distinctions. First and foremost, due to the two assets’ neutrality.
Because of their issuer and the jurisdiction in which they operate, stablecoins cannot maintain their impartiality. On the other hand, XRP does not subscribe to the same core principles. It is a globally neutral asset linked to XRPL, the company’s decentralized ledger.
Ultimately, these distinctions justify why removing XRP is not a matter of alarm; the function of the asset indicates that Ripple only wants to make money from the $150 billion stablecoin market. Its performance in other areas suggests it could benefit significantly from entering the market.
When Santander, one of the biggest banks in the EU, saw that utilizing XRP wouldn’t meet its clients’ needs, the bank decided to put Ripple on hold. Due to the rising expenses of international XRP payments and MoneyGram’s requirement to establish third-party agreements with cryptocurrency exchanges in various locations, a legendary partnership between the two companies ended.
MoneyGram ended its agreement with Ripple, which required the company to invest $30 million to use RippleNet. This decision was made in response to a class-action lawsuit brought by shareholders who claimed MoneyGram should have known that XRP might be classified as a security and might have negatively impacted MoneyGram’s financial results.
It will be clear whether XRP is secure after appeals in Ripple’s four-year legal battle with the SEC. It is a complex scenario at the moment. Last year, Judge Analisa Torres determined that although XRP is not a security (primarily when traded on exchanges), it functions as an investment contract when Ripple offers the token to eligible buyers.
And therein lies the problem. Investors have purchased quarterly XRP tranches from Ripple for hundreds of millions of dollars for several years, funding the company. According to the SEC, Ripple and two of its executives sold XRP for more than $1.3 billion through unregistered securities offerings; of those sales, $770 million was made to institutions violating Section 5 of the Securities Act.
That kind of action is likely to be permitted to continue on a different scale, regardless of the outcome of the appeals process. As a privately held corporation, Ripple’s financials are difficult to understand. Nevertheless, these programmed sales accounted for a sizable portion of non-bot XRP trading activity in several quarters before the SEC’s litigation.
In the past, Ripple has stated that more than 200 central banks and financial institutions from more than 40 countries are its clients for RippleNet. However, very little information is often available about how frequently businesses use Ripple’s financial services, even after it was first announced that they would use XRP for cross-border liquidity. The pilots are often only internal and not applied to applications that interact with customers.
