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Analysis: Ripple’s stablecoin approved says CEO Garlinghouse
December 11, 2024
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Ripple’s CEO Brad Garlinghouse said yesterday that the New York Department of Financial Services (NYDFS) has approved its stablecoin US dollar RLUSD, resulting in a 7% boost in the value of the XRP cryptocurrency. Ripple has not yet starting issuing it.

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.

There’s also a recognition about the increasing fragmentation of ledgers. One of the reasons why Solana has done so well of late is because it is not relying on layer 2 scaling solutions. The composable nature of blockchains makes being on the same chain an advantage. That matters for ‘crypto institutions’.

Look at how Ondo uses BlackRock’s BUIDL money market fund as a reserve asset. BUIDL was recently usurped in market capitalization by Hashnote’s US Yield Coin (USYC). Why? Because the Usual Protocol (and stablecoin) is using USYC for its reserves.

Being on the XRP Ledger makes it harder and riskier for protocols on other chains to use RLUSD. On the other hand, RLUSD could kick start more activity on the XRP Ledger. But given activity is currently greater elsewhere, a separate chain is a net disadvantage.

However, Ripple has two aces up its sleeve. One is it already has relationships with many money transfer businesses. Integrations for TradFi institutions are usually a hurdle. With Ripple’s acquisition of the custody firm Metaco, several banks are already integrated. However, apart from BBVA, which is exploring stablecoins with Visa, Metaco’s customers are not amongst the many banks that are embracing stablecoins.

On the other hand, the Ripple brand is associated with two things: cross border payments and fights with the SEC. Hopefully, the former will be the one that springs to mind.

The cart before the horse?

While there’s a lot of exciting happenings in the U.S., it’s worth putting the recent run up in prices into context. Today the market capitalization of the XRP token is around $134 billion. That’s an awful lot.

Last year, Ant Group, the owner of the Chinese payments firm Alipay, was valued at $75 billion. It has more than 1.3 billion users, around 80 million merchants and 650 million active monthly users. Plus, it has various investment and lending apps with serious volumes.

Before the November elections, the XRP Ledger had around 13,000 active wallets daily. Many of those are just trading XRP. But if we take a super optimistic view that they are all transacting for payments and there are 13,000 different wallets each day, that would amount to 390,000 active monthly users. It’s more likely a fraction of that.

Of course, Ant is not a perfect candidate for comparison. But it’s just worth asking if the cart isn’t coming before the horse. Ripple hasn’t even issued the stablecoin yet. It needs to demonstrate that it can get institutions to adopt the stablecoin, not just in announcements but at scale in real transactions. It needs to keep them using the stablecoin in the face of a torrent of competition. And if XRP is to benefit, it needs to attract significant other activity onto the XRP Ledger. The valuation appears to assume this is all guaranteed.

 

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The Great Onboarding: US Government Anchors Global Economy into Web3 via Pyth Network

For years, the crypto world speculated that the next major cycle would be driven by institutional adoption, with Wall Street finally legitimizing Bitcoin through vehicles like ETFs. While that prediction has indeed materialized, a recent development signifies a far more profound integration of Web3 into the global economic fabric, moving beyond mere financial products to the very infrastructure of data itself. The U.S. government has taken a monumental step, cementing Web3's role as a foundational layer for modern data distribution. This door, once opened, is poised to remain so indefinitely.

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This development is closer to science fiction than traditional finance. The same oracle network, Pyth, that secures data for over 350 decentralized applications (dApps) across more than 50 blockchains, processing over $2.5 trillion in total trading volume through its oracles, is now the system of record for the United States' core economic indicators. Pyth's extensive infrastructure, spanning over 107 blockchains and supporting more than 600 applications, positions it as a trusted source for on-chain data. This is not about speculative assets; it's about leveraging proven, robust technology for critical public services.

The significance of this collaboration cannot be overstated. By bringing official statistics on-chain, the U.S. government is embracing cryptographic verifiability and immutable publication, setting a new precedent for how governments interact with decentralized technology. This initiative aligns with broader transparency goals and is supported by Secretary of Commerce Howard Lutnick, positioning the U.S. as a world leader in finance and blockchain innovation. The decision by a federal entity to trust decentralized oracles with sensitive economic data underscores the growing institutional confidence in these networks.

This is the cycle of the great onboarding. The distinction between "Web2" and "Web3" is rapidly becoming obsolete. When government data, institutional flows, and grassroots builders all operate on the same decentralized rails, we are simply talking about the internet—a new iteration, yes, but the internet nonetheless: an immutable internet where data is not only published but also verified and distributed in real-time.

Pyth Network stands as tangible proof that this technology serves a vital purpose. It demonstrates that the industry has moved beyond abstract "crypto tech" to offering solutions that address real-world needs and are now actively sought after and understood by traditional entities. Most importantly, it proves that Web3 is no longer seeking permission; it has received the highest validation a system can receive—the trust of governments and markets alike.

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US Dept of Commerce to publish GDP data on blockchain

On Tuesday during a televised White House cabinet meeting, Commerce Secretary Howard Lutnick announced the intention to publish GDP statistics on blockchains. Today Chainlink and Pyth said they were selected as the decentralized oracles to distribute the data.

Lutnick said, “The Department of Commerce is going to start issuing its statistics on the blockchain because you are the crypto President. And we are going to put out GDP on the blockchain, so people can use the blockchain for data distribution. And then we’re going to make that available to the entire government. So, all of you can do it. We’re just ironing out all the details.”

The data includes Real GDP and the PCE Price Index, which reflects changes in the prices of domestic consumer goods and services. The statistics are released monthly and quarterly. The biggest initial use will likely be by on-chain prediction markets. But as more data comes online, such as broader inflation data or interest rates from the Federal Reserve, it could be used to automate various financial instruments. Apart from using the data in smart contracts, sources of tamperproof data 👉will become increasingly important for generative AI.

While it would be possible to procure the data from third parties, it is always ideal to get it from the source to ensure its accuracy. Getting data directly from government sources makes it tamperproof, provided the original data feed has not been manipulated before it reaches the oracle.

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