Earlier this year the announcement of plans for the stablecoin raised concerns amongst the XRP community. Wasn't XRP meant to be an intermediary currency? Wouldn't a dollar stablecoin replace that functionality?

However, if a Ripple stablecoin were to encourage more activity on the network, then it would be good for XRP's other purpose – as the native currency of the XRP Ledger.

An approval by the NYDFS has another benefit. The regulator is rather fussy about which blockchains can be used by companies that hold its trust charter. So far it has only approved Ethereum and Solana which are used by Paxos which issues the PayPal USD stablecoin and its own Paxos dollar. Stablecoin issuer Circle is not a trust company and hence not subject to the same restrictions regarding blockchains.

In other words, with the NYDFS authorization, it's not just Ripple that can issue regulated tokens on the XRP Ledger, but it makes it much easier for others to do so.

Given Ripple's institutional focus, that matters. While Circle's USDC is generally considered safe and regulated, a lack of a trust charter is a weakness from an institutional perspective. That's not just our opinion. It's also the view of S&P Global Ratings.

Will institutions adopt stablecoins?

The word institution is nowadays used to cover quite a range of organizations. There are TradFi institutions such as banks and asset managers. There are traditional money transfer businesses which have been Ripple's sweet spot. Plus, there are a ton of new crypto institutions.

While banks are going to struggle with holding stablecoins because of Basel rules (for now), many around the world are engaging at an experimental level. We've written many times about the appeal of stablecoins for asset managers. And XRP holders don't need to be told about the advantages for cross border payments. So institutional interest in every category is likely to grow very significantly.

The question is whether Ripple and RLUSD can ride the wave.

RLUSD and the competition

There's an immense amount of competition, with new stablecoins being announced weekly. The recent Paxos announcement of the Global Dollar Network is particularly interesting and is attracting institutions by sharing revenues. USDC issuer Circle is actively targeting corridors in Latin America for corporate payments as illustrated in a recent stablecoin report.