Ripple has announced the launch of a U.S. dollar-backed stablecoin to compete with USD Tether (USDT) and Circle’s USD Coin (USDC).
In an interview earlier this week, Brad Garlinghouse, the current CEO of Ripple Labs, said that the blockchain company has decided to launch a stablecoin pegged at $1. The stablecoin will start trading later this year at a fixed value of $1, providing a secure investment option, according to Garlinghouse.
“The Ripple stablecoin will be backed by a one-to-one reserve of U.S. dollar deposits, U.S. Government bonds, and cash equivalents, ensuring its stability,” the CEO said.
The stablecoin market is worth around $150 billion, and many stablecoin giants, such as USDT and USDC, are firmly grounded in it. However, Garlinghouse is confident that the launch of the Ripple stablecoin is a good move for the company and will bring a new competitive edge to the market.
Ripple sees the stablecoin market in a positive light in years to come. Garlinghouse believes the ‘market will look different, certainly based on size.” David Schwartz, Ripple Labs’ Chief Technology Officer, also noted that the company thinks the sector “will be over $2 trillion by 2028, and there are only two market leaders.”
Why Ripple Wants to Launch a Stablecoin
Earlier in 2022, during the terraUSD crash period, USDT, the leading stablecoin with a $106.2 billion market capitalization, became unstable and lost its value below 1$. Additionally, in 2023, USDC temporarily moved below 1$ after revealing its vulnerability to the collapsed Silicon Valley Bank.
Following these events, doubts have risen about Tether. Many critics question the source of its reserve and are no longer sure and confident that the company has enough funds to survive a bank run.
Garlinghouse emphasized that the strategic decision to establish a new stablecoin was made last year, demonstrating Ripple’s proactive response to market trends and its commitment to maintaining a solid position in the cryptocurrency market amidst challenging circumstances.
With significant concerns about transparency and security, Garlinghouse also mentioned Ripple’s plan to hire a third-party firm to conduct and publish monthly attestations on its stablecoin reserves, including which banking partners used to manage assets.
According to Garlinghouse, the Ripple stablecoin will be launched first in the U.S before being extended to other regions. He added that Ripple Labs has not decided which exchange will list it first.
Further, GarlingHouse stated that introducing the Ripple stablecoin will not overshadow the purpose of XRP, the Ripple Labs native token.