I already reported about Ripple, a well-known blockchain company dealing with cross-border payment solutions and mostly associated with the XRP launching a new token this autumn. It’s been in the making for some time and as the event nears, I will break it down for you and give you my take on why I don’t like the idea.
Ripple announced that it will soon be releasing a stablecoin that tracks the US dollar named RLUSD as part of a new product called RippleNet Cloud.
Although the popularity of stablecoins has increased in the digital crypto space due to their price stability and potential uses, the approach that seems to be taken by Ripple with the stablecoin RLUSD is one moving toward institutional adoption and regulatory compliance. This could dampen access by retail investors or the general public.
RLUSD is, in most ways, tailored to create liquidity and empower financial institutions for the purposes of cross-border payments through the use of Ripple technology. This echoes the narrative that we heard long time ago about XRP.
Right?
If you remember, this was the main appeal of XRP. Everyone I know bought into this hopium (against my advice) and the story they kept selling, was that major banks across the globe will use XRP for cross-border transfers to replace SWIFT and save some money in the process.
Except, this never materialized and then came the SEC court case against Ripple that further crashed their dreams of lambos, jets and private islands. Most investors have abandoned this ship, while some are still hanging out of despair, for their losses are too heavy to bear, might as well wait and hope it will recover.
But enough about XRP and its poor market performance. There’s a new token now, new launch, new hype to sell:
RLUSD – The stablecoin, being pegged to the US dollar, enabling Ripple to lessen the friction while carrying out international settlements without going through the headache of maintaining pre-funded accounts while offering quicker settlement times. Pretty much the story XRP was thriving on back in the day.
Regulatory Concerns and Exclusivity
However, as the DailyCoin states in an article, RLUSD would not be available to all, as it claimed, including the general public but could only be utilized by some elite, the “plebs” excluded. Resulting from the restrictive regulation within the stablecoin space, authorities crack down on compliance with anti-money laundering and know-your-customer policies.
In giving access to RLUSD only in a limited way, Ripple can supposedly reduce regulatory risks and secure the stablecoin not being used for anything other than its core function of servicing institutional payments. This approach befits Ripple’s history of closely collaborating with regulators and its determination to operate within the paradigms of existing financial legislation.
Ripple’s Conservative Approach
The very cautious manner in which Ripple has approached the RLUSD is not surprising given the regulatory environment with stablecoins. Over the past couple of years, a spate of stablecoins has been riddled by issues related to regulation, especially over concerns of illicit use and a general lack of transparency into the management of reserves. By doing that, Ripple is looking to avoid possibly significant issues and stay as friendly to regulators as possible. With this, RLUSD might be better positioned to be more palatable to financial institutions, assuming they may find it more secure and compliant with regulations than its competitors.
Potential Impact on Adoption
But while Ripple’s approach to RLUSD, focused on institutional adoption and regulatory compliance, may make retail access limited, it could also have the benefit of placing the stablecoin in more strategic markets that could help in its wider adoption and long-term viability. By targeting financial institutions, Ripple is easily able to tap into its extensive partnerships and experience in the cross-border payment space to drive the adoption of RLUSD.
Furthermore, the more institutions that onboard to RLUSD for their international payment requirements, the more this could strengthen overall demand for such a stablecoin and provide greater liquidity and stability in the long run. It would ultimately be of greater benefit to both institutional and retail users who may engage in an RLUSD-enabled ecosystem, enabling greater blockchain technology adoption across the financial spectrum.
Ripple’s strategy with RLUSD is a sign of how much this company is committed to both regulatory compliance and institutional onboarding, as it is in many aspects of its business. An approach like that surely limits retail access to the stablecoin, but can have another effect: make sure it succeeds and goes into broader adoption in the longer run, with blockchain technology in general being taken up in the financial industry. The future development of this will indeed be very interesting, considering the balancing act done for both institutional and retail users with the regulatory landscape by other leading stablecoin projects.
On the one hand, having a stablecoin issued by a well-known and long-standing blockchain-centric company could be a good thing from first glimpse.
On the other hand though, Ripple is not exactly the most respected or trusted blockchain leader and their focus so far has been largely targeted toward banks, i.e. the legacy financial institutions that Bitcoin was created to eradicate (or at least weaken their influence and control). This is the main driving force behind the animocity most crypto users have against Ripple. On top of this, XRP, a once favourite token of many a new crypto investor, has fallen out of favour long time ago, never to return to its past glory (the days when everyone was holding XRP in good faith). Too many investors got badly burnt by the negative performance of the token on the market and despite the claims that this new stablecoin would bring more utility to XRP, I seriously doubt that anyone will want to get back to trading or investing in XRP for the long term.
☝These are my opinions, not financial advice, always DYOR.
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The information contained in this article is for informational purposes only. Nothing herein shall be construed to be financial or legal advice. This content reflects solely my own opinion and analysis.
Purchasing cryptocurrencies poses considerable risk of losses. All information is meant for public awareness and contains what is already in the public domain. Always do your own research!
