Summary XRP has performed exceptionally since Donald Trump's election victory in November sparked a crypto bull rally. Ripple has launched its native stablecoin RLUSD on the XRP Ledger and on the Ethereum network. Ripple's launch of RLUSD in the heat of the crypto bull market is an excellent example of leveraging market conditions. For now, the launch of RLUSD does not directly threaten the use case for XRP in the Ripple ecosystem; however, there are hypothetical scenarios in which RLUSD adoption could threaten XRP’s role in the Ripple ecosystem. Ripple USD ( XRP-USD ) has been all the rage since the crypto market got into a bull trajectory, following President Trump's election win and his pro-crypto stance during the campaign. One crypto company to potentially benefit from possible policy shifts in the coming administration is Ripple. Crypto enthusiasts are familiar with Ripple Lab’s long-drawn battle with the U.S. SEC and Gary Gensler’s anti-crypto agenda these past years. Now that Trump has nominated Paul Atkins , a pro-crypto businessman, as the candidate to head the SEC, Ripple will likely see a breadth of fresh air and see its years-long case come to a settlement and a close. RLUSD: A Strategic Addition to the Ripple Ecosystem In a full-blown crypto bull market, like we're beginning to witness, product releases and strategic partnerships that are well-timed can amplify the momentum of the related crypto assets, easily creating double-digit gains for these crypto assets. These well-timed events create sustained catalysts for the crypto asset throughout the bull market. Ripple's launch of its stablecoin , the Ripple USD (RLUSD), in the heat of the crypto bull market is an excellent example of leveraging market conditions. As we’ve been using stablecoins more and more in our flows, that really piqued our interest that we should have our own native stablecoin that can be more cost effective and more operationally efficient to use. Jack McDonald, Ripple’s senior vice president of stablecoins. A blockchain network is as strong as the number of users who use it for transactions and other on-chain activities. Ripple’s launch of the RLUSD stablecoin means that Ripple’s blockchain network, the XRP Ledger (“XRPL”), now taps into the $200 billion stablecoin market, and now has access to more users and liquidity. Being a native Ripple product, I believe RLUSD will not struggle to find utility from the get-go. Ripple has facilitated over $70 billion in payments for its enterprise clients, which includes banks and payment service providers, and will now use RLUSD to facilitate such transactions, moving forward. The RLUSD stablecoin was launched on both the Ripple network and on Ethereum. I think it is a smart business move to also launch the token on Ethereum to leverage the Ethereum network's large user base and liquidity pool. Some crypto analysts might perceive the launch of Ethereum - a competing network to XRPL - as counterintuitive and as diluting the focus and use case of XRPL by introducing a competing blockchain, but I see the dual launch as a strategic move. The launch on both blockchain networks opens more use case opportunities for RLUSD. Both the Ethereum network and Ripple’s XRPL network have their unique perks, and I think users will gravitate towards which blockchain to choose for their RLUSD transactions based on the users' specific use case and preference. For instance, DeFi users might prefer using RLUSD on the Ethereum network, while enterprises that offer high-frequency, low-cost payment services, like remittances, may prefer RLUSD on XRPL. Ethereum’s vast DeFi ecosystem and dApps with complex smart contract capabilities are a strength for Ethereum. XRPL’s low fees and fast transactions are strengths for XRPL. However, I feel RLUSD will naturally see more usage on XRPL based on the sheer volume of institutional payments that Ripple processes and Ripple's core focus on cross-border settlements, which XRPL was built from the ground up to handle. Ripple’s efforts to build regulatory-compliant crypto products over the years would pay off here. There has been past scrutiny of stablecoins by regulators, and there have been incidents of stablecoins losing their 1:1 peg to their fiat currency. The TerraUSD (“UST”) stablecoin crash of spring 2022 is one of such depeg cases. There have been recent regulatory actions on stablecoins where Europe-based crypto exchanges have begun delisting a handful of stablecoins , including Tether USD ( USDT-USD ), Gemini Dollar ( GUSD-USD ), Dai ( DAI-USD ), and PayPal USD ( PYUSD-USD ), found not to be compliant with the E.U.’s MiCA regulatory requirements. Ripple’s RLUSD was issued in accordance with the New York State Department of Financial Services stablecoin guidance and will be subject to periodic stringent reporting, including third-party audits of fiat reserves. Based on Ripple’s focus on building institutional and regulatory-compliant crypto products, I believe Ripple will strive to maintain regulatory compliance in other jurisdictions, and RLUSD adoption will expand to those places where other existing stablecoins currently face regulatory restrictions, winning a chunk of the stablecoin market share in the process. RLUSD: A Threat To or a Catalyst For XRP? The launch of RLUSD does not directly threaten the use case for XRP in the Ripple ecosystem. RLUSD is a stablecoin within the ecosystem, while XRP remains a liquidity token. XRP’s use in the Ripple ecosystem has been as an on-demand liquidity (“ODL”) provider in cross-border settlements. When transfers are made in cross-border settlements involving two disparate fiat currencies between a sender and a recipient, XRP serves as a bridge currency or an “interim” currency between the sender and the recipient. The sent currency is first converted to XRP and then converted next to the recipient's local currency. This process allows institutions to carry out cross-border settlements in real-time without needing pre-funding. ODL plays a crucial role in Ripple's cross-border settlement network, and XRP was specifically built and integrated into the XRP ledger to provide such liquidity. XRP has been widely adopted for its role in providing liquidity in the ecosystem over the years. Most institutional partnerships utilizing RippleNet are built around the ODL feature. I see no immediate threats to XRP’s role as a liquidity provider in the Ripple ecosystem. RLUSD and XRP will most likely complement each other in terms of demand. If adoption of RLUSD grows and more cross-border settlements take place on RippleNet, demand for XRP’s as an ODL provider should also surge. It is, however, worth mentioning that the crypto space and its related technologies evolve rapidly, and there are future scenarios that could play out in which RLUSD adoption becomes a threat to XRP’s role in the Ripple ecosystem. For example, a potential threat lies in how well the adoption of RLUSD and the Ripple ecosystem tech stack goes among financial institutions globally. If RLUSD becomes a globally recognized stablecoin, or RippleNet becomes some sort of “standard platform” among financial institutions, and the adoption of RLUSD spreads in key jurisdictions, there could be a workaround in Ripple's tech, whereby the need for XRP’s ODL will erode. This is a hypothetical scenario but shouldn't be ruled out because the crypto world evolves quickly and regulation and adoption are happening at a more accelerated and unpredictable pace. Takeaway Stablecoins have been around long enough, and Ripple's launch of its native stablecoin isn't exactly a jaw-dropping innovation. What is distinctive about RLUSD is Ripple's institutional transaction volume, the payment network, and the institutional partnerships Ripple has built over the years which will benefit RLUSD in terms of adoption. Seeking Alpha I think the launch of RLUSD has already been priced into XRP, as the coin has been on a run since early November, achieving nearly 400% price gain. The crypto market follows the news trader’s idea of “buying the rumor, and selling the news," which I think XRP's recent price action has been a reflection of. XRP isn't one of my favorite altcoins at the moment because I think it won't be among the most rewarding crypto assets in this bull season of the market cycle. XRP has had impressive runs in the last two bull markets, especially during the 2017 crypto bull market. However, in the spirit of the current crypto bull market, I'm upgrading my rating for XRP to a “buy” despite my reservations about XRP giving impressive gains moving forward. My rating upgrade to a “buy” is mainly based on the fact that we are in a crypto bull market and going long established crypto assets like XRP is a no-brainer.
