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Ripple’s Stablecoin Vs. Tether/ Circle’s Stablecoin: A Comparative Study

By April 8, 2024April 9th, 20244 minute read

Ripple, a payment technology firm, has declared its entry into the stablecoin market by revealing its imminent launch of a US dollar-pegged digital currency. This move positions Ripple to directly challenge established stablecoin giants such as Tether and Circle, who currently dominate the $150 billion market.

Ripple’s venture into the stablecoin sector marks a strategic expansion of its product portfolio. The company aims to capitalize on the escalating demand for stable digital assets.

In this blog, let’s learn more about Ripple’s stablecoin and how it will compete with Tether and Circle’s stablecoin.

About Ripple’s Stablecoin

Ripple, a prominent blockchain technology company, has announced its plans to introduce a US dollar-denominated stablecoin. The company aims to foster greater integration between crypto and traditional finance while enhancing liquidity for the XRP Ledger blockchain.

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Initially launching on both the XRP Ledger and Ethereum networks, the stablecoin seeks to:

  • bolster liquidity,
  • attract developers, and
  • expand its user base on the XRP Ledger, the native blockchain of the digital asset XRP. 

This project aligns with the broader trend in the stablecoin market, where cryptos are pegged 1:1 to the US dollar and backed by reserves such as short-term US Treasurys. Ripple’s stablecoin is poised for further expansion onto additional blockchains in the future, with Ripple CEO Brad Garlinghouse emphasizing the company’s commitment to bridging the gap between traditional finance and crypto.

Despite ongoing legal challenges, including a lawsuit from the Securities and Exchange Commission (SEC) regarding the classification of XRP, Ripple remains focused on advancing its mission of facilitating seamless and efficient financial transactions through innovative blockchain solutions.

2 Key Reasons Why Ripple is Launching Its Stablecoin

  • DeFi is Built on Stablecoins

The Decentralized Finance (DeFi) sector has emerged as a powerhouse within the crypto space, with a significant portion of its activity revolving around stablecoins. As a major holder of XRP, Ripple has a vested interest in fostering greater financial activity within the XRP Ledger ecosystem. Stablecoins are crucial in the DeFi landscape, serving as the foundation for various financial activities and transactions.

For example, a substantial number of trading pairs on popular DeFi exchanges like Uniswap and lending protocols like Aave involve stablecoins. This reliance on stablecoins underscores their importance in facilitating liquidity and stability within the DeFi ecosystem. By launching its stablecoin, Ripple aims to tap into this thriving market and leverage the growing demand for stablecoins in DeFi applications.

  • Way to Attract More Users to XRP Ledger

Ripple’s decision to introduce its stablecoin also aligns with its broader goal of expanding the adoption and utility of the XRP Ledger. With most DeFi activity centered around stablecoins, Ripple sees the issuance of its stablecoin as a strategic approach to attract users to the XRP Ledger ecosystem. The native capabilities of the XRP Ledger, including its Decentralized Exchange and Automated Market Maker, were specifically designed to utilize XRP as the bridge asset.

By introducing a trusted stablecoin onto the XRP Ledger, Ripple aims to enhance the platform’s appeal to developers, users, and businesses. This move is expected to drive greater adoption and development within the XRP Ledger ecosystem, fostering a vibrant and sustainable environment for financial innovation and transactions.

Here is a step-by-step guide to buying Ripple (XRP).

Ripple’s Stablecoin Vs. Tether/ Circle’s Stablecoin

  • Issuing Platform

Ripple’s stablecoin is planned to be issued on both the XRP Ledger and the Ethereum blockchain, providing versatility in blockchain platforms.

In contrast, Tether’s stablecoin primarily operates on the Ethereum blockchain but extends to other platforms like Tron and Algorand.

  • Backing and Reserve Assets

Ripple intends to back its stablecoin with US dollar deposits, short-term US government Treasurys, and other cash equivalents, ensuring robust asset backing and transparency.

On the other hand, Tether has faced scrutiny regarding the transparency and credibility of its reserves, with concerns raised over the adequacy of its backing assets.

  • Compliance and Transparency

Ripple emphasizes a “compliance-first” approach for its stablecoin, prioritizing asset backing and regulatory compliance transparency. The company plans to emulate Circle’s focus on compliance and transparency, directly competing against USD Coin (USDC).

Comparatively, Tether has faced criticism regarding its transparency and regulatory compliance, with ongoing scrutiny over its reserve attestations and regulatory challenges.

  • Auditing and Accountability

Ripple intends to have the reserve assets for its stablecoin audited by a third-party accounting firm, with monthly attestations to ensure transparency and accountability. This approach addresses concerns raised in the early days of Tether’s stablecoin regarding the credibility of reserve attestations and potential risks of fund mismanagement.

  • Market Strategy and Growth

Ripple aims to capture market share in the stablecoin ecosystem, leveraging its credibility, track record, and strong balance sheet to establish itself as a significant player. The company recognizes the potential growth of the stablecoin market and aims to be among the top contenders, prioritizing market expansion and adoption.

In contrast, Tether has maintained its dominance in the stablecoin market but faces increasing competition and regulatory challenges, which could impact its future growth trajectory.

  • Use Cases and Integration

Ripple’s stablecoin is positioned to complement its existing ecosystem, including the RippleNet payment network and automated market maker. The stablecoin is expected to provide liquidity and capture volatility and arbitrage opportunities between multiple assets, improving the overall functionality and utility of the Ripple ecosystem.

Conversely, Tether’s stablecoin primarily serves as a means of value transfer and store of value within the crypto market, with limited integration into broader financial ecosystems.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
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Harshita Shrivastava

Harshita Shrivastava is an Associate Content Writer with WazirX. She did her graduation in E-Commerce and loved the concept of Digital Marketing. With a brief knowledge of SEO and Content Writing, she knows how to win her content game!

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