Blockchain company Ripple is releasing its own long-awaited stablecoin tomorrow after receiving Bitcoin. RLUSD is backed 1:1 by the U.S. dollar, meaning the company has promised to hold an equivalent sum of dollars in a reserve to collateralize each stablecoin that it issues.
McDonald says that RLUSD will appeal to people who are interested in digital assets but might be averse to the volatile nature of most cryptocurrencies. “Stablecoins are a bit of a hybrid situation, where it walks and talks a lot like a U.S. dollar, but by its nature, is nowhere near as volatile as cryptocurrencies are,” he said.
Ripple also hopes to integrate RLUSD into traditional financial institutions. Ripple Payments, the arm of Ripple that partners with global banks to facilitate international transactions, will begin to use RLUSD early next year, according to the company.
The stablecoin space
Stablecoins have emerged as one of the most popular types of cryptocurrency over the past few years, and amassed a total market cap of over $200 billion, according to CoinGecko data. They have been particularly favored in parts of the world where local currency is vulnerable to high inflation.
But 90% of the market is dominated by two major players: Tether’s USDT and Circle’s USDC. Unlike USDT, which is largely unregulated, McDonald says, RLUSD will appeal to investors who are looking for a cryptocurrency that has passed regulatory inspection.
“Adhering to the guidelines of New York DFS is not simple. It's complex,” McDonald said. “There's a lot of requirements that we need to meet, both to have been approved, but then also to manage the business going forward.”
