In his latest video analysis on YouTube, Adam Cochran, partner at Cinneamhain Ventures (CEHV), an activist venture capital firm, described Ripple’s newly launched stablecoin, RLUSD, as a “Trojan Horse” poised to transform both decentralized finance (DeFi) and traditional banking sectors.
Why Ripple’s RLUSD Is A ‘Trojan Horse’
Cochran emphasized the strategic significance of RLUSD, stating, “Ripple quietly dropped a bombshell and no one’s really talking about it but it could dramatically revolutionize the position of Ripple in the marketplace.” He elaborated that while the crypto community remains focused on XRP’s price movements and its upcoming programmability upgrades, RLUSD represents a fundamental shift in XRP Ledger (XRPL) ecosystem.
RLUSD differentiates itself from other stablecoins by adhering to stringent regulatory standards. Cochran highlighted, “RLUSD isn’t just another USDC clone; this is more into the original Paxos stablecoin that’s NYDFS regulated, custodian issued, backed by secure cash assets.”
The stablecoin is exclusively backed by real US cash equivalents held in US banks registered with regulators and subject to regular audits. This regulatory compliance ensures that RLUSD meets stringent monetary transfer licenses, including a Virtual Asset Service Provider (VASP) license, positioning it for use by EU exchanges and banks.
Unlike other stablecoins such as Tether (USDT), RLUSD is set to be issued on both the XRP Ledger and the Ethereum blockchain. Cochran pointed out, “Ripple is making sure they themselves capture it and can provide more value into the ecosystem.”
Cochran posits that RLUSD is integral to unlocking the vast multi-trillion dollar Forex markets on the blockchain without necessitating advanced technological upgrades. “This stablecoin is going to unlock the ability for real-world asset (RWA) issuers, Forex issuers, currency issuers, and other programs to be able to price on a native AMM their assets in the US dollar,” he remarked.
The introduction of RLUSD is expected to facilitate the pricing of assets in US dollars directly on the XRPL’s Automated Market Maker (AMM), thereby attracting institutional trading and Forex settlement activities. Cochran elaborated: “Ripple can begin to benefit from the yield that comes in and put that back into the XRP ecosystem.” He suggests that the stablecoin could enhance liquidity on-chain, which is currently confined to opaque exchange balances:
“Sophisticated participants don’t want to have an AMM that trades against Ripple as the underlying currency. They want to be able to price their assets in the US dollar and until the launch of RLUSD that was something that wasn’t possible. This stablecoin is going to unlock the ability for RWA assets, Forex issuers, currency issuers and other programs […] to allow Ripple to bring a lot of their overall liquidity on-chain.”
Ripple has long targeted institutional clients, including banks, financial institutions, and Forex traders. Cochran emphasized the importance of regulatory compliance, stating, “If Ripple can get their MA compliance approved and be offered in the EU and bring this stablecoin to diverse markets, they have a great opportunity to get these providers to integrate Ripple’s Network by offering them on-chain yield and sharing of that yield.”
Moreover, the company’s strategic focus on programmability through upcoming features like Hooks and an Ethereum Virtual Machine (EVM) sidechain is expected to further enhance RLUSD’s utility. “Ripple still really needs hooks and their EVM sidechain to perform well, get the programmability in place to be able to offer more sophisticated DeFi products,” Cochran stated.
The global stablecoin market, currently dominated by Tether (USDT) and USD Coin (USDC), presents a significant opportunity for RLUSD, especially within the EU where regulatory frameworks are stringent. Cochran estimated, “If Ripple was to issue the same amount of stablecoins as Tether does nowadays, they’d be looking at something like $5 billion a year potentially in yield gains.”
Cochran further pointed out the competitive edge RLUSD could provide Ripple, stating, “These are the type of asset issuers that care about RWA issuance, Forex settlement and interchange […] something that no one else in the DeFi space has the expertise or the interested parties or the tooling to be able to provide.”
Cochran concluded his analysis by affirming Ripple’s strategic trajectory, “Ripple has a great potential path in front of it if it continues to execute on delivering the vision in the way that it wants to.”
At press time, XRP traded at $2.51.
Featured image from YouTube, chart from TradingView.com