Blockchain firm #Ripple has decided to make a move that marks its entry into the $150 billion stablecoin market. Accordingly, he announced that he would launch a dollar-backed stablecoin. This move will pit Ripple against stablecoin giants Tether, which is behind the largest stablecoin UDST, and Circle, the issuer of USDC. Let's look at the details of the development.

Ripple Launches Dollar-Backed Stablecoin

Ripple is first launching its stablecoin in the US, but is also considering offering additional regional stablecoins in non-US markets such as Europe and Asia. According to Ripple, the stablecoin will always be backed 1 to 1 by an equivalent sum of assets held by the company in reserve (US dollar deposits, US government bonds and cash equivalents).

The crypto firm said its reserves will be accounted for in public monthly attestation reports. However, he did not disclose which company would conduct the audit.

Ripple CEO Brad Garlinghouse made a statement on the issue and said that competition in the stablecoin field did not deter them. Garlinghouse said the company decided to introduce a stablecoin to the market last year in response to the "depegging" of rival firms Tether's USDT token and Circle's USDC.

Concerns About Stablecoins

USDT temporarily lost its $1 peg in 2022 due to market instability resulting from the collapse of terraUSD, a popular “algorithmic” stablecoin. USDC also temporarily dropped below $1 in 2023 after its relationship with the bankrupt technology-focused lender Silicon Valley Bank was revealed.

Some critics dispute the source of Tether's reserves. Doubts have also been expressed about whether the company is sufficiently capitalized to survive a "bank operation". Tether, on the other hand, says that its token is fully backed by quality reserves and can always cover withdrawals, even in difficult times.

Without naming names, Garlinghouse said there was "some uncertainty" among U.S. regulators about the current market leader. He argued that Ripple is a regulated entity with licenses in New York, Ireland and Singapore, among other countries. Garlinghouse stated that Ripple has not given up on XRP as a payment token and expressed his thoughts that stablecoins will serve as a more complementary product for the XRP ecosystem.

XRP price reacted immediately to this development. The price of the cryptocurrency increased from $0.56 to $0.61.