Emily Walker
In a recent YouTube analysis, Adam Cochran, a partner at Cinneamhain Ventures (CEHV), an activist venture capital firm, referred to Ripple’s newly launched stablecoin, RLUSD, as a “Trojan Horse” that could significantly disrupt both decentralized finance (DeFi) and traditional banking sectors.
Why Ripple’s RLUSD Is Called A ‘Trojan Horse’
Cochran underlined the strategic impact of RLUSD, claiming, “Ripple quietly launched an important innovation that is not receiving adequate attention, yet it has the potential to profoundly change Ripple’s market position.” He noted that while the crypto community is preoccupied with XRP’s price fluctuations and future programmability enhancements, RLUSD signifies a pivotal development within the XRP Ledger (XRPL) ecosystem.
This stablecoin is unique because it complies with strict regulatory measures. Cochran noted, “RLUSD is not merely another version of USDC; it leans more towards the initial Paxos stablecoin, which is regulated by NYDFS and backed by secure cash assets.”
RLUSD is fully backed by genuine US cash equivalent assets stored in regulated US banks and is subject to regular audits. This adherence to regulatory standards ensures that it complies with essential monetary transfer licenses, including a Virtual Asset Service Provider (VASP) license, enabling its use in EU exchanges and banking institutions.
In contrast to stablecoins like Tether (USDT), RLUSD will be available on both the XRP Ledger and the Ethereum blockchain. Cochran remarked, “Ripple is ensuring they capture this opportunity to enrich the ecosystem.”
Cochran believes RLUSD is crucial for tapping into the extensive multi-trillion dollar Forex markets on the blockchain without requiring sophisticated technological advancements. He explained, “This stablecoin will enable real-world asset (RWA) issuers, Forex issuers, and others to price their assets in USD on a native AMM basis.”
The launch of RLUSD is anticipated to allow assets to be priced directly in US dollars through the XRPL’s Automated Market Maker (AMM), which could attract institutional trading and Forex settlement activities. Cochran added, “Ripple can start earning yields that can subsequently be reinvested into the XRP ecosystem.” He indicated that this stablecoin could enhance on-chain liquidity, which has previously been limited to unclear exchange balances:
“Advanced market players prefer not to have an AMM trading with Ripple as the base currency. They prefer to price their assets in US dollars, and until RLUSD was introduced, that option was not available. This stablecoin will enable RWA assets and Forex issuers to significantly improve Ripple’s liquidity on-chain.”
Ripple has long aimed at attracting institutional clients, including banks and financial institutions, as well as Forex traders. Cochran stressed the significance of regulatory compliance, stating, “If Ripple can secure MA compliance and roll out in the EU, it can penetrate diverse markets, presenting an excellent opportunity to integrate Ripple’s Network by providing on-chain yield.”
Furthermore, Ripple’s focus on programmability, through upcoming features like Hooks and an Ethereum Virtual Machine (EVM) sidechain, is expected to enhance the functionality of RLUSD. Cochran mentioned, “Ripple truly requires hooks and their EVM sidechain to succeed and develop sophisticated DeFi products.”
The global stablecoin market, primarily dominated by Tether (USDT) and USD Coin (USDC), offers RLUSD a substantial opportunity, especially in the EU, where regulatory standards are rigorous. Cochran estimated, “Should Ripple issue a stablecoin supply comparable to Tether’s current output, they could potentially see yields of around $5 billion annually.”
Cochran further emphasized the competitive advantage RLUSD could afford Ripple, stating, “These asset issuers are particularly interested in RWA issuance and Forex settlements, services that no other players in DeFi currently provide with comparable expertise or interest.”
In conclusion, Cochran reinforced Ripple’s strategic potential, stating, “Ripple has a promising path ahead if it remains committed to executing its vision effectively.”
At the time of writing, XRP was valued at $2.51.