On Friday, Ripple began testing its stablecoin on its own blockchain, the XRP Ledger, and Ethereum. The cryptocurrency company first announced plans in April to launch a cryptocurrency pegged to the U.S. dollar called Ripple USD (RLUSD). The token will be backed by short-term U.S. Treasuries, dollar deposits, and cash equivalents.
“Ripple USD is currently in its beta phase and is being rigorously tested by our enterprise partners,” the company said in a blog post. “This phase is crucial to ensure that the stablecoin meets the highest standards of security, efficiency, and reliability before it becomes widely available and after receiving regulatory approval.”
Why is Ripple launching RLUSD?
Stablecoins, cryptocurrencies designed to maintain a constant value by being pegged to a commodity or currency like the U.S. dollar, are a booming industry. Valued at $153 billion, brokerage Bernstein predicts the market could reach $2.8 trillion by 2028. Over the past day, trading volume for the most popular stablecoin, Tether’s USDT, was $10 billion higher than that of Bitcoin, according to data from CoinGecko. Cross-border payments are a common use case fueling demand.
At the same time, the cryptocurrency industry sees stablecoins as the easiest target to hit when it comes to cryptocurrency regulation. The European Union published rules for issuing and trading cryptocurrencies in June, the new British government is expected to follow suit by the end of the year, and a stablecoin bill was introduced in the House of Representatives a year ago.
For Ripple, a push into stablecoins also makes strategic sense as they are a natural complement to the company’s existing business model, which is to use the XRP token to facilitate cross-border transactions.
Ripple, however, will be entering an already crowded field. Ian Taylor, head of cryptocurrencies and digital assets at KPMG UK and a board advisor to lobbying group CryptoUK, recently said: Fortune He said he was working with half a dozen payments and fintech companies that have banking licenses pending UK regulation to issue stablecoins. He expects that once the legislation comes into force, there will be a “significant increase” in sterling-backed coins ready for issuance.
“I don’t know if the market is clamoring for a new stablecoin,” Andy Bromberg, CEO of stablecoin wallet Beam, recently said. FortuneIndustry leaders USDT and Circle (USDC) together dominate over 90% of the stablecoin market, according to data from CoinGecko. Competing with the duopoly that dominates the stablecoin market won’t be easy for Ripple’s new cryptocurrency: of the top 10 stablecoins by market cap, half have accumulated less than $1 billion.
So why launch a cryptocurrency? The reason is probably yield, due to the high interest rates on US Treasuries. The current interest rate on so-called I-bonds (a type of US bond whose interest rate is adjusted every six months) issued between May 2024 and October 2024 is 4.28%, according to government data. So, if Ripple’s cryptocurrency can reach $1 billion, that’s an annual yield of over $42.8 million.
“These pieces are incredibly profitable businesses,” Bromberg said.
