$RLUSD Is Ripple’s ‘Trojan Horse’ for DeFi & Banking

Ripple officially launched its much-anticipated dollar-backed stablecoin, known as RLUSD, on several global crypto exchanges on Tuesday.

First introduced in June, RLUSD is designed to maintain a constant value in line with the price of the U.S. dollar. Each RLUSD token is fully backed by U.S. dollar deposits, U.S. government bonds, and cash equivalents.

According to Ripple, RLUSD is currently available on Bitso, Uphold, CoinMENA, MoonPay, and Archax, with other listings coming in the future.

It comes as a competitor to Tether’s USDT and Circle’s USD Coin (USDC), which are currently dominating the stablecoin market.

Techopedia explores RLUSD’s chance of success and how Ripple plans to bring TradFi and decentralized finance (DeFi) closer together.

Table of Contents Table of Contents

1. Key Takeaways
2. RLUSD to Become the Go-To Payment Network for Cross-Border Transactions
3. Ripple Remains Focused on Institutional Investors
4. Stablecoin Market Still Unregulated
5. The Bottom Line
6. FAQs
7. References

Show Full Guide

Table of Contents

1. Key Takeaways
2. RLUSD to Become the Go-To Payment Network for Cross-Border Transactions
3. Ripple Remains Focused on Institutional Investors
Show Full Guide
4. Stablecoin Market Still Unregulated
5. The Bottom Line
6. FAQs
7. References

RLUSD to Become the Go-To Payment Network for Cross-Border Transactions

RLUSD is compatible with the Ethereum blockchain and the XRP ledger, a blockchain created by Ripple Labs alongside its native token, XRP.

The launch comes days after RLUSD received regulatory approval from the New York Department of Financial Services, which approved the firm’s stablecoin after months of consideration.

“Early on, Ripple made a deliberate choice to launch our stablecoin under the NYDFS limited purpose trust company charter, widely regarded as the premier regulatory standard worldwide,” said Brad Garlinghouse, Ripple’s CEO.

Ripple has revealed that it plans for RLUSD to serve as a cross-border settlement and treasury remittance tool. The firm also plans to integrate RLUSD into its digital payment protocol, Ripple Payments, in early 2025 to facilitate global payments for its enterprise customers.

Furthermore, Ripple seeks to use RLUSD as a tool to bridge the gap between traditional fiat currencies and the crypto ecosystem. By enabling on-ramping and off-ramping, RLUSD aims to provide users with a smooth transition between fiat and digital assets.

Adam Cochran, partner at venture capital firm Cinneamhain Ventures, believes RLUSD is part of a larger effort by Ripple to become the go-to payment network for cross-border transactions, with a focus on appealing to traditional finance institutions.

The investor, best known for his work in cryptocurrency, said in a video released as RLUSD launched that the stablecoin is “Ripple’s Trojan Horse for bringing multi-trillion dollar Forex markets onto the blockchain at least without the need to even wait for fancy Tech upgrades.”

Cochran claimed that the new stablecoin will allow different types of financial assets, like Real-World Assets (RWAs), Forex, and other digital currencies, to be bought, sold, or traded using US dollars directly on Ripple’s blockchain.

Furthermore, Ripple will be able to move more liquidity onto its own blockchain instead of keeping it on outside exchanges. It will do this by encouraging trading between XRP and US dollars using an Automated Market Maker (AMM) that sets prices automatically.

“If Ripple can bring a lot of that on-chain, they as a company can begin to benefit from the yield that comes in and put that back into the XRP ecosystem,” he said.

Ripple Remains Focused on Institutional Investors

According to Cochran, Ripple’s broader goal is to attract banks, financial institutions, Forex traders, and brokers to its ecosystem by offering a regulated settlement network with on-chain yield opportunities.

“Ripple has really been focused on institutions — they want banks on board, they want financial institutions, they want Forex Traders and Brokers to use Ripple as an alternative settlement network,” he said.

If the company manages to obtain Markets in Crypto-Assets (MiCA) regulation approval in the EU and bring its stablecoin to more markets, it would be able to establish deeper relationships with financial institutions.

“Small banks in the EU and globally would love the opportunity to buy U.S. cash equivalent yield-bearing assets that are custody in U.S. banks and interchangeable on a network.”

The venture capitalist noted that Ripple has had a payment network for a long time, and they are now updating it to meet ISO 2022 standards — a global messaging system used by banks.

However, Ripple has struggled to get banks and financial institutions to widely adopt it. The main reason is that traditional payment systems rely on multiple banks to complete settlements, and this process is slow and complicated.

To solve this, Ripple is introducing a new system using an AMM and its new stablecoin. This system allows banks, debt issuers, and financial institutions to issue and trade assets like RWAs, debt instruments, and Forex settlements directly on Ripple’s network.

Instead of relying on slow, phone-based settlement processes, everything can happen on one platform, making it faster, more transparent, and more efficient.

This approach could even move Ripple beyond its earlier focus on being a SWIFT competitor, positioning it as a facilitator for complex, high-value institutional settlements, Cochran said.

Stablecoin Market Still Unregulated

The stablecoin market, currently valued at over $200 billion, remains largely unregulated in the United States. However, several attempts have been made to establish a regulatory framework for stablecoins.

In October, Senator Bill Hagerty (R-TN), a member of the Senate Banking Committee, released a discussion draft of a stablecoin legislation. The draft suggests a dual regulatory approach, including state regulation for smaller issuers and federal oversight for large issuers.

Earlier, in April 2024, Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) introduced the Lummis-Gillibrand Payment Stablecoin Act. Under the proposed legislation, payment stablecoin issuers would be subject to reserve and operational requirements.

The bill defines payment stablecoins as digital assets pegged to the U.S. dollar that are intended for use as a means of payment or settlement.

Conversion to dollars would be an obligation for issuers, and the asset itself would not be classified as a security.

The Bottom Line

Ripple’s launch of the RLUSD stablecoin could mark the start of the firm’s ambitious goal to become a dominant player in cross-border settlements.

By integrating RLUSD into Ripple Payments and enabling seamless trading of RWAs, Forex, and digital currencies on its blockchain, Ripple could position itself as a key bridge between traditional finance and the crypto ecosystem.

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