In recent times, speculation was rife about Ripple’s potential launch of a new stablecoin. All doubts were put to rest when Brad Garlinghouse, CEO of Ripple Labs, announced that the New York Department of Financial Services (NYDFS) had approved Ripple’s stablecoin, RLUSD. This development positions RLUSD as a formidable contender against other stablecoins, notably USDT and USDC. Let’s delve into what sets RLUSD apart and why it’s a game-changer in the crypto world.
What Makes RLUSD Special?
The approval from the NYDFS is a significant milestone for Ripple’s RLUSD, underscoring its credibility and trustworthiness. This approval enables US banks to hold RLUSD on the XRPL/ETH ledger, an advantage that USDC and USDT currently do not have. But what makes RLUSD truly unique, and why did it take years to secure approval?
According to crypto expert Vincent Van Code, RLUSD’s compliance with key US financial regulations is pivotal. These include the US Generally Accepted Accounting Principles (GAAP), Basel III, the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve Rules, as well as the Dodd-Frank Act. Such comprehensive adherence ensures that RLUSD is backed entirely by onshore US assets, like Treasury bonds, and operates under real-time audits.
RLUSD’s conformity with US GAAP means it possesses a clear value and can pass impairment tests, which are critical for financial reporting in the US. Moreover, compliance with Basel III indicates that RLUSD meets liquidity and risk management standards essential for banks, as established by the Basel Committee on Banking Supervision in the wake of the 2007 financial crisis.
Van Code also highlights that RLUSD’s assets are held in regulated financial institutions, ensuring adherence to FDIC and Federal Reserve guidelines. This compliance guarantees that RLUSD’s assets are under regulated custody, providing an added layer of security.
Finally, compliance with the Dodd-Frank Act enhances transparency, offering oversight for financial instruments. This legislation, enacted following the 2007 financial crisis, emphasizes market transparency and accountability.
Why USDT and USDC Fall Short
When comparing RLUSD to its competitors, Van Code points out several shortcomings in both USDT and USDC. USDT, for instance, has been criticized for its lack of regular audits and failure to meet US GAAP and Basel III standards. The stablecoin reportedly holds reserves that include high-risk or illiquid assets, raising concerns about its stability.
While USDC fares better than USDT in terms of transparency, Van Code argues that its offshore operations prevent it from fully complying with US regulations. This limitation hampers its ability to compete with RLUSD, which is fully compliant and backed by onshore assets.
In conclusion, RLUSD has established a new benchmark for stablecoins by adhering to stringent US regulatory standards. As the first stablecoin that US banks can hold, RLUSD is paving the way for a more secure and transparent future in the stablecoin landscape.
