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Ripple aims to tap into the growth potential and niche opportunities within the stablecoin market.
Ripple plans to issue a stablecoin tied to the US dollar, which will be 100% backed by USD deposits, short-term US bonds, and other cash equivalents. Expected to debut later this year, Ripple’s stablecoin will be deployed on the XRP Ledger and the Ethereum blockchain, with plans to extend to other blockchains and DeFi platforms, Ripple said on its website.
To ensure transparency and address potential concerns about reserve quality, Ripple will publish monthly attestations of its stablecoin reserves. Additionally, these reserves will be audited by a reputable third-party accounting firm. Specific details regarding the chosen firm have not yet been disclosed.
Brad Garlinghouse, Ripple CEO, explained that the launch is to address the growing demand for stablecoin with a compliant and trusted solution and drive development and use cases within the XRPL ecosystem.
“Institutions entering this space are finding success by partnering with compliant, crypto-native players and Ripple’s track record and resiliency speaks for itself, as we launch new products and acquire companies through multiple market cycles. This move is also monumental for the XRP Ledger community, driving more use cases, liquidity and opportunities for developers and users,” said Garlinghouse.
Ripple claims its stablecoin offers a unique combination of features tailored for enterprise use, regulatory compliance, and a thriving developer ecosystem. The firm seeks to fill a gap in the market for institutions seeking stablecoin integration for large-scale payments.
A lucrative market
Stablecoins are an integral part of the crypto ecosystem. According to data from the Federal Reserves, over 80% of trading volume on major centralized crypto exchanges in 2022 involved stablecoins. This popularity can be attributed to their role as a frictionless on-chain intermediary. Unlike converting to traditional fiat currency, stablecoins allow traders to quickly move between positions without leaving the crypto ecosystem.
With a value of around $150 billion, Ripple CTO David Schwartz expects the stablecoin market to reach over $2 trillion by 2028. Currently, the market is dominated by Tether’s USDT and Circle’s USDC. However, Schwartz sees opportunities for niche players to carve out their space.
“We think it will be over $2 trillion by 2028, and there’s only two market leaders. We don’t think it’s a winner-take-all-all ecosystem, particularly on the DeFi side,” said Schwartz.
The stablecoin market is not just sizable, it’s highly profitable. Leading stablecoin issuer Tether recently reported a nearly $3 billion in quarterly profits last year, with $1 billion coming from US bonds. Last month, Tether hits a $100 billion market cap; this level of growth puts Tether in the same league as established giants like British oil and gas giant BP and Shopify in terms of market capitalization.
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