In 2020, the US Securities and Exchange Commission accused Ripple and its co-founders of violating securities laws by selling its native cryptocurrency XRP without first registering it with the SEC.
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The cryptocurrency company said its reserves will be counted in monthly certification reports available to the public. He did not mention the company that would conduct the audit.
Ripple is debuting its stablecoin in the US, but has not ruled out offering additional regional products in markets outside the US, such as Europe and Asia.
The move would pit Ripple against stablecoin giants like Tether, which is behind the largest stablecoin UDST, and the USDC issuance circuit.
Meanwhile, payments giant PayPal launched its own US dollar stablecoin called PayPal USD, a stablecoin backed by the US dollar and its dollar equivalent and issued by cryptocurrency company Paxos.
But Ripple CEO Brad Garlinghouse said he is not deterred by competition. “This market will look different [in future]“It definitely depends on the size,” he told CNBC in an interview this week.
Garlinghouse said the company decided to bring a stablecoin to market last year in response to the “decoupling” between Tether’s USDT and Circle’s USDC tokens.
USDT temporarily lost its peg to one dollar in 2022 amid market instability resulting from the collapse of terraUSD, the popular “algorithmic” stablecoin.
The USDC also temporarily fell below $1 in 2023 after revealing its exposure to collapsed tech-focused lender Silicon Valley Bank.
Some critics question the source of Tether's reserves, and have doubts about whether the company has enough capital to survive a “bank run.”
For its part, Tether says its token is fully backed by high-quality reserves and has always been able to meet withdrawals, even in times of hardship.
Garlinghouse said there was “some uncertainty” about the current market leader among US regulators, without revealing its name. He said that Ripple is regulated and has licenses in New York, Ireland and Singapore, among other countries.
Tether is the leader in the stablecoin market with a market capitalization of $106.3 billion, according to CoinGecko data. The company was not immediately available for comment.
Tether is registered with FinCEN, the US financial crimes watchdog, which is not regulated. The company is required to file suspicious transaction reports and reports on trades totaling more than $10,000.
The Ripple stablecoin will also serve a purpose that the cryptocurrency giant is promoting as part of its on-demand liquidity product, which aims to quickly settle transactions between banks and other financial companies using the XRP token as a “bridge” currency.
Ripple has faced hurdles in finding a use case for Ripple with banks and payment companies.
Santander initially wanted to use XRP for cross-border payments, but chose not to after discovering that Ripple was not active in enough markets yet to support its needs.
MoneyGram has terminated a partnership to use XRP for cross-border transfers after citing increased costs associated with the need for partnerships with exchanges and other necessary counterparties in local markets.
Garlinghouse insisted that Ripple has not abandoned XRP as a payment token and that stablecoins will serve as a complementary product to the XRP ecosystem.
“We have been using stablecoins in our payments flows for years,” he said. “This is nothing new for us.”
He added that other “layer one” protocols — blockchain networks with their own tokens — have launched stablecoins and recorded growth in overall volume and liquidity.
“Our view is that by having pools of liquidity native to the XRP ledger, it complements and helps grow the XRP ecosystem,” Garlinghouse told CNBC. “In fact, the first request we receive from the XRP community is to launch a USD-backed stablecoin on the XRP Ledger.”
XRP is up about 13% over the past 12 months, according to CoinGecko data, and is currently trading at about 57 cents.
The US Securities and Exchange Commission in 2020 filed a lawsuit against Ripple, alleging that the company illegally sold XRP to investors when it should have registered the transactions with the regulatory body.
A court judge recently ruled that XRP is not itself a security, but said sales to institutions should be considered illegal sales of securities.
The blockchain company sold $728.9 million worth of its XRP token to hedge funds and other sophisticated buyers, according to the U.S. District Court for the Southern District of New York.
The SEC is seeking $2 billion from Ripple as part of the lawsuit.
Garlinghouse said what the SEC is asking for is unreasonable, because it only relates to $728.9 million of XRP that the company sold to institutions.
The total settlement is expected to be a fraction of that in the “millions” rather than billions of dollars.
The SEC was not immediately available for comment.
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