Ripple's new US dollar stablecoin to challenge Tether and Circle in $150 billion market

Ripple is joining the $150 billion stablecoin market. They're launching a digital currency that matches the U.S. Dollar in value. Ripple will hold the same resources to ensure every token's worth, like U.S. dollar cash deposits, government bonds, and other stable assets.

The crypto company has revealed that it will provide monthly public reports on its reserves. However, the company conducting the audit has not been disclosed.

Ripple vs. Tether and Circle

Ripple is starting its stablecoin in the U.S. but might later expand to non-U.S. areas like Europe and Asia. This move makes Ripple a competitor of big stablecoin companies like Tether, the creator of the biggest stablecoin USDT, and Circle, the issuer of USDC.

A well-known payment company, PayPal, started its own U.S. dollar stablecoin named PayPal USD. It was done with the help of cryptocurrency company Paxos, and the stablecoin is supported by U.S. dollars and other forms of currency equivalent to the dollar.

Ripple CEO Brad Garlinghouse remains unfazed by the competition. In his conversation with CNBC this week, he predicted that the market will certainly change in size in the future.

Ripple's stablecoin strategy

Garlinghouse explained that they decided to launch a stablecoin last year. This move reacted to the changes with Tether's USDT token and Circle's USDC. Both these rival companies experienced issues in 2022 when market instability led to USDT temporarily fluctuating from its $1 value following the fall of another significant player, the algorithmic stablecoin terraced.

In 2023, USDC's value momentarily fell under $1, following exposure to the failing tech-focused lender, Silicon Valley Bank. Critics question the legitimacy of Tether’s reserves and wonder if it has enough funds to endure a "bank run."

Tether maintains that its token has complete backing from quality reserves. It further states that they have always fulfilled withdrawal requests, even during challenging times. Garlinghouse expressed concerns about the regulatory clarity around the current market leader without mentioning any specific name.

He emphasized that Ripple is a well-regulated entity that holds licenses in multiple countries, including New York, Ireland, and Singapore.

A Tether spokesperson responded to Ripple's move to launch a stablecoin and Chief Executive Brad Garlinghouse's comments. According to a statement made to CNBC, they expressed hope that Ripple's team might achieve greater success with their new stablecoin than they have accomplished so far.

Tether is listed with FinCEN, a U.S. agency that monitors financial fraud. Even though this doesn't equate to regulation, Tether must report any suspicious transactions exceeding $10,000.

Ripple's commitment to XRP

A stablecoin from Ripple could contribute significantly to its On-Demand Liquidity service. This service aims to quickly settle transactions between banks and financial institutions using the XRP token as a 'bridge' currency. However, Ripple has encountered challenges in establishing its use with banks and payment firms.

Santander initially planned to use XRP for international payments but did not. The reason was Ripple's lack of presence in enough global markets to meet Santander's requirements.

Also, MoneyGram halted its collaboration to employ XRP for cross-border transactions due to the elevated costs. These costs were tied to establishing relationships with exchanges and other required participants in local markets.

Garlinghouse maintains the company's commitment to XRP as a payment token, asserting that introducing stablecoins will provide a complementary product for the XRP ecosystem. He further highlighted that using stablecoins in their payment flows is not a recent development but has been a consistent practice for years.

He further explained that other fundamental blockchain networks with unique tokens have introduced stablecoins and witnessed increased total transaction volume and liquidity.

Garlinghouse explained to CNBC the company's perspective on the concept, citing that pools of liquidity native to the XRP ledger complement and help grow the XRP ecosystem. Interestingly, he disclosed that the most frequent request they receive from the XRP community is the launch of a USD-backed stablecoin on the XRP Ledger.