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Ripple, issuer of the altcoin XRP, announced its plans to launch a US dollar-backed stablecoin to compete with Circle’s USDC and Tether’s USDT for market space over the next five years.

In an interview with Ripple’s chief technology officer David Schwartz prior to the announcement, he detailed plans for the stablecoin that will initially be issued on the XRP Ledger and Ethereum blockchains.

“It’s funny that the question you ask, we still don’t have an answer to. What will the ticker be? And what are we going to call it? For now, you’ll have to call it Ripple’s stablecoin,” Schwartz said during a video conference.

Expectations for Ripple’s stablecoin

Ripple has been considering the idea of ​​launching a stablecoin for over a year. Schwartz believes that the current stablecoin ecosystem is not as diverse and robust as it could be. Assessing the current value of the stablecoin market at $150 billion, Schwartz said there is room for one more big player:

“We believe it will exceed US$2 trillion by 2028, and there are currently only two market leaders. We don’t believe it’s a one-win ecosystem, especially on the DeFi side.”

Ripple’s stablecoin will hold a 1:1 ratio with the US dollar, and the company plans to back the tokens with US dollar deposits, short-term US Treasury bonds and “other cash equivalents”. Furthermore, Schwartz states that Ripple seeks to emulate Circle’s compliance focus and will likely aim to compete against USDC:

“Our approach will be very much ‘compliance first’. We are very transparent about how assets are backed, so we will compete directly against USDC.”

Next steps for launch

Reserve assets will be audited by an independent accounting firm, and Ripple will publish monthly reports. Schwartz drew comparisons to the early days of Tether’s USDT token, where critics often raised alarm about the issuer’s potential to steal funds and the credibility of its reserves.

“Initially when Tether launched, a big concern was whether these guys would run away with all the money because they have a lot of incentive to do that. Then after a while you think, ‘Wait a minute, these guys have a long-term business,’” Schwartz said.

Ripple’s CTO added that the reality of launching a new stablecoin that could attract hundreds of billions of dollars will lead to these types of concerns. The company relies on its credibility and history, as well as a strong balance sheet to enter the stablecoins market.

“I think we have a credible claim to be in the conversation near the top. If, at the end of two years, we are number three, but the market has grown 10 times what it is today, that is still very good,” Schwartz said.

US launch

Ripple initially launched its stablecoin in the US, but has not ruled out offering additional regional products in other markets such as Europe and Asia. The move would pit Ripple against stablecoin giants like Tether, which is behind the largest stablecoin UDST, and Circle, the issuer of USDC.

Meanwhile, payments giant PayPal has launched its own US dollar-backed stablecoin called PayPal USD, a stablecoin backed by dollars and dollar equivalents issued by cryptocurrency firm Paxos.

But Ripple CEO Brad Garlinghouse said he is not intimidated by the competition. “This market will be different [no futuro]certainly based on its size,” he told CNBC in an interview this week.

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