The Global Stablecoin Race is On

2022 might well be remembered as the Year of the Stablecoin. Despite getting off to a rocky start with the implosion of Terra, the stablecoin sector rebounded to reach a new high of $1 trillion in monthly trading volume in August, and has been on the agendas of the World Economic Forum, the Committee on Payments and Market Infrastructure and U.S. regulators as they continue to evaluate its role and impact on economic markets. 

As stablecoin growth continues, and more use cases are explored in the broader crypto landscape, Ripple has also picked up the pace and gained traction with new partners like Stably and STASIS. Together with Ripple, they’ll be tapping the XRP Ledger (XRPL) as a fast, low-cost and scalable blockchain that offers clear liquidity, reliability and interoperability advantages for stablecoin issuers.

Choosing the Right Blockchain and Digital Currency Solution

Stablecoins benefit from the transaction advantages of a cryptocurrency coupled with the stability (hence the name) of a fiat currency. This opens up new doors to further financial inclusion and accelerate economic growth by enabling digital purchasing histories and greater access to credit, and by removing frictions from cross-border payments for companies of all sizes.  

However, the key to maximizing these outcomes is choosing the right issuing blockchain. For financial institutions, innovators, central banks and other potential stablecoin issuers, security and reliability are paramount when evaluating blockchains. Additionally, a chain’s sustainability and interoperability are also increasingly important determining factors as we continue to shift towards a greener, multi-chain future. 

That’s why the XRPL is best-suited to support stablecoins at scale. Built to support the tokenization of any asset, the XRPL can handle a high volume of transactions that settle in mere seconds and cost only a fraction of a cent. This native token functionality also makes it easy for issuers to create, issue and manage any asset without the need for a central intermediary. The XRPL’s built-in Authorized Trust Lines feature also ensures that stablecoins and other issued tokens can only be held by accounts that the issuer themselves authorizes for an added layer of security.

New Stablecoin Issuance on the XRPL

This powerful combination of security, reliability and interoperability is what led STASIS—which issues the largest euro-backed stablecoin, EURS—to integrate the  XRPL. As a public decentralized chain with high levels of liquidity and accessibility, the XRPL also provides easy on and off-ramps for developers, institutions and consumers to unlock new stablecoin use cases. 

Web3 payment infrastructure provider Stably recently chose to issue its USDS stablecoin on the XRPL because it offers liquidity and settlement at scale for tokenized assets. Stably was keen to combine its industry-first, regulatory-compliant stablecoin with an ultra-fast, low-cost public blockchain built for payments and known for its emphasis on compliance and transparency. Stably enables individuals and businesses from 200+ countries to mint and redeem USDS directly on the XRP Ledger.

Meanwhile, Ripple is working with the Republic of Palau to help explore a potential government-backed stablecoin on the public XRPL. The ledger’s inherently green design is highly important to a country known for its leadership on climate issues.

Stablecoins as Multi-Chain Assets

The use of both USDS and EURS across multiple blockchain networks aligns with Ripple’s vision for a multi-chain, multi-asset future. As banks and regulators also hop on board the multi-asset train, it becomes all the more essential to understand the benefits of public blockchains that interoperate. 

So why is interoperability important? Stablecoins rely on an issuer as the counterparty which hinders them from interoperating across payment networks. With the XRP Ledger, its native digital asset, XRP, acts as a neutral bridge asset that can be sent directly without needing a central intermediary. This makes it easy for stablecoin issuers to bridge two different currencies and seamlessly exchange them across payment networks quickly and efficiently. Furthermore, the XRPL’s auto-bridging feature helps improve cross-currency liquidity for more streamlined, cost-effective exchanges between XRP and other digital assets on the ledger.

Stepping Towards a Stablecoin Future

As we move into 2023 and beyond, stablecoins will continue to grow in popularity and reach—but not without the right blockchain in place. As banks and other financial institutions continue to explore additional stablecoin use cases, cross-chain interoperability and the many benefits afforded by public, decentralized blockchain networks will be key stepping stones on the path to a stablecoin future.

To learn more about creating, issuing or managing stablecoins on the XRP Ledger, please visit XRPL.org.