Ripple’s Chief Technology Officer (CTO), David Schwartz, recently addressed concerns surrounding the potential impact of Ripple’s upcoming stablecoin on the use of XRP as a bridge currency for its On-Demand Liquidity (ODL) service.
As previously announced, Ripple plans to launch a new stablecoin on the XRP Ledger (XRPL) and Ethereum networks. While the general reaction to this news has been positive, some speculate that Ripple may be shifting away from XRP.
These mixed sentiments have sparked discussions regarding the stablecoin’s effect on XRP’s utility. The conversation started when an XRP community member sought clarification on the role of the stablecoin in the ODL payment model, which is now known as Ripple Payments. They questioned whether the introduction of the stablecoin would make XRP obsolete in facilitating cross-border transactions. Essentially, this investor wanted to know if Ripple was signaling a move away from XRP as the preferred bridge asset for international payments.
Interestingly, attorney Fred Rispoli suggested earlier this week that Ripple’s primary intention for launching the stablecoin is to use it as a bridge currency for ODL partners in the United States. Additionally, on-chain researcher Anderson, citing legal documents released in the Ripple vs. SEC lawsuit, asserted that Ripple might be considering using its stablecoin for U.S.-based ODL customers instead of XRP. This shift could be due to the legal concerns some U.S.-based institutions have regarding XRP, despite its legal clarity.
In response to questions about the stablecoin potentially replacing XRP, Schwartz emphasized the importance of encouraging the adoption of payment solutions that can settle with XRP efficiently. He highlighted the goal of removing any barriers that hinder the use of XRP when it offers the most optimal solution. Schwartz emphasized that promoting a payment method inferior to using XRP for settlement would be counterproductive. Notably, a report earlier this year revealed that 50% of ODL transactions utilized XRP.
Schwartz’s statement underscores Ripple’s commitment to promoting the adoption of XRP where it provides the best user experience and economic benefits. The company aims to ensure that users have access to the most efficient payment solutions available.
However, concerns continue to persist among some community members. One member expressed uncertainty about the circumstances in which XRP would be the optimal choice for settlement, speculating that the stablecoin might outperform XRP in certain scenarios.
Schwartz addressed this concern by noting that the suitability of XRP versus the stablecoin depends on various factors, such as the duration for which a bridge asset is held during transactions. He suggested that in cases where the bridge asset is not held for an extended period, the stablecoin may not necessarily offer inherent advantages over XRP. Instead, factors like liquidity and the availability of on/off ramps could influence the choice between the two assets.
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