Introduction

In recent years, the cryptocurrency market has developed rapidly. Cryptocurrencies represented by Bitcoin have attracted the attention of global investors, driving the widespread application and innovation of blockchain technology. In this context, Stablecoins, as a special type of cryptocurrency, are pegged to fiat currency or other assets, making their prices relatively stable, and have become an indispensable part of the cryptocurrency market. The emergence of Stablecoins aims to address the issue of excessive price volatility in cryptocurrencies, providing market participants with a more stable store of value and medium of exchange, promoting the use of cryptocurrencies in daily payments, cross-border remittances, and other fields.

As an important member of the stablecoin field, XRP Stablecoin has a unique technical architecture and application scenarios. It is based on the XRP Ledger blockchain technology developed by Ripple, aiming to achieve fast, low-cost cross-border payments and value transfers. The XRP Ledger utilizes a technology called ‘consensus ledger’ to ensure quick transaction confirmation and ledger consistency through a consensus mechanism among validating nodes. Compared to traditional Bitcoin and Ethereum blockchains, XRP Ledger has higher transaction processing speed and lower transaction fees, giving it a significant advantage in the field of cross-border payments.

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2. XRP Stablecoin Overview

2.1 XRP and the association with Stablecoin

XRP, as a cryptocurrency launched by Ripple, has shown unique utility in the payment field since its inception. In the research paper “Central Bank Digital Currency for Cross-Border Payments” released by the World Bank in November 2021, XRP is classified as a stablecoin, sparking widespread attention in the cryptocurrency community. The World Bank believes that stablecoins are a type of digital currency that can provide instant processing and secure payments, with the key feature of maintaining parity with fiat currency, thus possessing price stability. Based on this criterion, XRP has been included in the stablecoin category by the World Bank due to its rapid and efficient characteristics in cross-border payments.

In the cross-border payment scenario, the traditional correspondent banking model has many pain points, such as complicated transaction processes, long processing times, and high costs. With its technology architecture based on the Ripple protocol, XRP can achieve rapid confirmation and low-cost settlement for cross-border payments. The consensus mechanism adopted by the XRP Ledger enables transactions to be verified in a short period of time, with an average transaction confirmation time of less than 5 seconds, greatly improving payment efficiency. At the same time, the transaction cost of XRP is extremely low, with an average cost of about $0.0002 per transaction, significantly reducing the cost of cross-border payments. These advantages enable XRP to have similar functions to stablecoins in the field of cross-border payments, providing users with stable and efficient value transfer services.

Despite XRP’s outstanding performance in the payment field, there are differing opinions in the cryptocurrency community about whether it truly belongs to stablecoins. Some community members believe that due to the relatively large price fluctuations of XRP, which differs from the strict pegging to traditional stablecoins and fiat currencies, it should not be classified as a stablecoin. However, there are also views that in specific use cases such as cross-border payments, XRP can provide a stable payment experience through its technological features similar to stablecoins. With the development of Automated Market Maker (AMM) technology, there are ideas suggesting that XRP could integrate stablecoin functionality through AMM, utilizing liquidity pools containing XRP and other stablecoins (such as USDC) to manage XRP supply, thereby ensuring its value stability to meet the banking industry’s demand for stability. However, this idea is still in a highly speculative stage.

2.2 Introduction to Major XRP Stablecoin Projects

In the field of XRP Stablecoin, Braza’s Brazilian Real stablecoin BBRL launched on XRPL has attracted much attention. BBRL is a stablecoin pegged to the Brazilian Real (BRL), developed and launched by Brazil’s leading financial institution Braza Group. Its goal is to provide a stable, efficient, and low-cost digital payment tool for the Brazilian and Latin American markets, promoting the modernization of the Brazilian financial system.

BBRL is pegged to the Brazilian real at a 1:1 ratio, meaning that the value of each BBRL token is always equal to 1 Brazilian real, effectively avoiding the common problem of significant price fluctuations in cryptocurrencies and providing users with a stable store of value and medium of exchange. BBRL is built on the XRP Ledger (XRPL) blockchain, making full use of XRPL’s technical advantages. XRPL is known for its speed, security, and strong scalability, with very fast processing speeds and an average transaction confirmation time of less than 5 seconds, meeting the needs for large-scale payments; transaction costs are also much lower than other blockchain platforms, giving BBRL an advantage in cross-border payments and instant transactions. Additionally, XRPL’s decentralized structure and security further enhance the transparency and credibility of BBRL stablecoin, ensuring the public record and traceability of each transaction, providing BBRL users with greater security protection.

Braza Group plays a key role in the BBRL project, responsible for ensuring the stability of BBRL and promoting its integration with the Brazilian financial system. The company plans to launch BBRL to institutional clients through the Braza On application in the first quarter of 2025, followed by direct access for B2C clients through the same application. Braza Group aims to capture 30% of the Brazilian stablecoin market by the end of 2025, dedicated to providing a secure and efficient digital transaction method for businesses and consumers through BBRL, promoting the development of Brazil’s digital economy. The launch of BBRL stablecoin is expected to improve the efficiency of Brazil’s domestic payment system and facilitate cross-border trade. Due to the frequent trade between Brazil and various countries, especially neighboring Argentina and other Latin American countries, the application of BBRL stablecoin can significantly reduce the cost and time of cross-border remittances, driving the development of the digital economy in the Latin American region.

3. Market Situation Analysis

3.1 Market Size and Growth Trends

As of now, the representative project RLUSD in the XRP Stablecoin field has shown a certain market size and growth momentum. The total supply of RLUSD has reached $120 million, reflecting its gradual emergence in the stablecoin market. In terms of the supply distribution on different blockchains, the supply of RLUSD on the XRP Ledger network accounts for 65%, approximately $78 million; while the supply on the Ethereum network accounts for 35%, approximately $42 million. This distribution indicates that RLUSD has fully utilized the advantages of the XRP Ledger and Ethereum blockchains, expanding its market coverage.

In the past few months, the supply of RLUSD has shown a steady growth trend. Through analysis of historical data, the total supply of RLUSD in August was 50 million US dollars, which increased to 80 million US dollars in September, and exceeded 120 million US dollars in October. This growth rate not only reflects the increasing demand for RLUSD in the market but also demonstrates Ripple’s active layout and promotion in the stablecoin market.

3.2 Main Participants and Competitive Landscape

In the stablecoin market, RLUSD’s main competitors include industry giants such as USDT and USDC. As of now, USDT has a market capitalization of as high as 80 billion US dollars, accounting for 40% of the stablecoin market share. It is widely used in cryptocurrency trading, cross-border remittances, and other fields, with a large user base and high market acceptance. USDC has a market capitalization of 50 billion US dollars, with a market share of 25%, and is popular among institutional investors due to its compliance and transparency.

By comparison, the market value of RLUSD is currently only $120 million, accounting for less than 1% of the market share, still in the early stages in the competitive stablecoin market. However, Ripple, with its rich experience and strong technical strength in the blockchain field, has provided strong support for the development of RLUSD, thanks to its deep accumulation in the cross-border payment field. Ripple’s XRP Ledger technology is renowned for its efficient and low-cost transaction processing capabilities, giving RLUSD a unique competitive advantage in cross-border payment scenarios. In addition, Ripple has established partnerships with numerous financial institutions, and these collaborative resources are expected to provide ample space for the promotion and application of RLUSD. With the continuous development and improvement of RLUSD, it is expected to gain a place in the stablecoin market, exerting a certain impact on the existing competitive landscape.

3.3 Price Trends and Market Reactions

Since its launch, RLUSD has maintained a relatively stable price, consistently pegged near a 1:1 ratio with the US dollar. Monitoring price data over the past 30 days, the price of RLUSD has fluctuated between $0.99 and $1.01, with minimal volatility, fully reflecting its stability as a stablecoin. This stable price trend provides market participants with a reliable store of value and medium of exchange, enhancing confidence in RLUSD within the market.

The market’s response to RLUSD has been relatively positive. When Ripple released news of its stablecoin plan, XRP’s price immediately surged by 10%. This market reaction indicates that investors generally have a positive outlook on the development prospects of RLUSD, believing that it will bring new growth momentum to the XRP ecosystem. During the beta testing phase of RLUSD, a large number of market participants actively engaged in testing, providing positive feedback, further boosting the market awareness and acceptance of RLUSD. However, there are also differing opinions in the market. Some investors are concerned that the launch of RLUSD may impact XRP’s market position, believing that there is some overlap in functionality between the two. However, in the long run, RLUSD and XRP have complementarity in Ripple’s strategic layout. RLUSD mainly focuses on stablecoin payment and value storage functions, while XRP plays a key role in cross-border payment clearing and settlement, and the coordinated development of the two is expected to give Ripple a greater competitive advantage in the cryptocurrency market.

Four, Analysis of Challenges

4.1 Technical Challenges

The decentralized governance model of the XRP Ledger has always been a focus of debate in the industry. Although Ripple emphasizes the decentralization of XRPL, the views of its former development director Matt Hamilton and current Chief Technology Officer David Schwartz have raised questions. Some believe that XRPL cannot pay validators, which may make it difficult for independent validators to join the network, potentially giving Ripple and its affiliates control over XRPL. While Hamilton believes that the lack of revenue in blockchain is the reason for its decentralization, with the interests of users and validators aligned, and that Ripple only has authority over its unique node list and cannot bypass the network through the Unique Node List (UNL), this claim has not completely dispelled market concerns.

The controversy over decentralized governance has the potential to negatively impact the technical stability and future development of the XRP Stablecoin. In terms of technical stability, if the decentralization of the validator network is questioned, the reliability of transaction verification and ledger consensus may be affected. Once there is a situation where a small number of entities control the validators, the confirmation process of transactions may be delayed, incorrect, or even tampered with, directly undermining the technical foundation on which the XRP Stablecoin relies as a stablecoin, leading to a decrease in user trust. From the perspective of future development, decentralized governance issues may hinder the XRP Stablecoin from attracting more developers and users. When developers choose a technical platform, they typically prioritize the decentralization and rationality of the governance model to ensure the project’s long-term sustainable development. Similarly, users also pay attention to the stability and security of the underlying technology when using stablecoins. Therefore, if the controversy over the decentralized governance of the XRP Ledger is not properly resolved, it may limit the development space of the XRP Stablecoin in the market, placing it at a disadvantage in competition with other stablecoins.

4.2 Market competitive pressure

In the stablecoin market, projects such as USDT and USDC have taken the lead due to their first-mover advantage and widespread market recognition. Since its launch in 2014, USDT has rapidly accumulated a large user base and a high market share, with a current market value of up to 80 billion US dollars and a market share of 40%, almost supported by all cryptocurrency exchanges and trading platforms, with unparalleled liquidity. USDC, on the other hand, has won the favor of institutional investors due to its strict adherence to transparency and regulatory compliance, with a market value of 50 billion US dollars and a market share of 25%.

In contrast, the market share of XRP Stablecoin is currently small, with RLUSD’s market value only at 120 million US dollars, accounting for less than 1% of the market share. In terms of market share, XRP Stablecoin needs to strive to expand its space in the fierce competition, attracting more users and investors. When users choose stablecoins, they tend to prefer products with a large market share and high liquidity, posing a major challenge for XRP Stablecoin in gaining user trust and market share. In terms of user awareness, USDT and USDC have established a high brand image in the minds of users through long-term market promotion and application, with high recognition for their stability and reliability. As a latecomer, XRP Stablecoin needs to invest more resources in market promotion and publicity to increase user awareness and trust. In addition, USDT and USDC have a more complete ecosystem, establishing close partnerships with numerous decentralized finance (DeFi) projects, wallets, and exchanges, further consolidating their position in the market and bringing greater pressure to the development of XRP Stablecoin.

4.3 Regulatory and Compliance Risks

Stablecoins, as an important part of the cryptocurrency field, have attracted close attention from global regulatory agencies. Different countries and regions have varying regulatory policies towards stablecoins, posing challenges to the global promotion and application of XRP Stablecoin. In the United States, regulatory agencies have a relatively strict attitude towards stablecoins, with the Securities and Exchange Commission (SEC) continuously expanding the scope and intensity of cryptocurrency regulation, including stablecoins in their regulatory focus. The Commodity Futures Trading Commission (CFTC) is also actively formulating regulatory rules for stablecoins to prevent financial risks.

Using USDT issued by Tether as an example, US regulatory agencies and prosecutors have investigated it for suspected violations of sanctions and anti-money laundering regulations. Although the CEO of Tether denied being under investigation, this incident still raised concerns in the market about the regulatory risks of stablecoins. Similarly, XRP Stablecoin faces similar regulatory risks. Failure to meet regulatory requirements could lead to legal action, fines, or even the risk of being banned from issuance and trading. The uncertainty of regulatory policies also limits the business expansion and innovation of XRP Stablecoin. In the issuance process, it is necessary to ensure that the issuance mechanism complies with regulatory requirements, including the management of reserves, compliance of issuance processes, etc.; in the trading process, it is necessary to comply with anti-money laundering, counter-terrorism financing, and other relevant laws and regulations to ensure the legality and transparency of transactions; in the expansion of application scenarios, it is also important to consider the impact of regulatory policies and avoid penalties for violations.

4.4 Community Trust and Scam Prevention

The XRP community faces a new scam threat when dealing with the RLUSD stablecoin. Coin World reported that false information about RLUSD is spreading in the community, with some people using the so-called ‘evidence’ from the XRP Ledger blockchain explorer to promote the issuance of 1 billion RLUSD tokens. The abnormal transactions in related XRPL accounts have also caught the attention of community members. Despite swift condemnation from prominent community figures labeling it as a scam, XRPL dUNL validator and NFT marketplace xrp.cafe founder Vet emphasized that RLUSD has not been issued and urged members to wait for official information from Ripple. However, this incident still has an impact on community trust.

Community trust is crucial for the development of the XRP Stablecoin. Once community members lose trust in the stablecoin project, it will directly impact its market promotion and usage. Investors may withdraw funds due to risk concerns, and users may choose other more reliable stablecoin products. Preventing such scams requires efforts from multiple aspects. The project team should enhance the timeliness and accuracy of information disclosure, release authoritative information through official channels, and avoid the spread of false information. Community members themselves also need to increase risk awareness, enhance their ability to identify scams, and not easily believe unverified information. By enhancing community awareness through community education, issuing risk warnings, and other means, community members’ awareness of prevention can be raised, jointly maintaining a trusted environment within the community, and creating a positive community atmosphere for the development of XRP Stablecoin.

V. Development Opportunities Insight

Opportunities brought by industry trends 5.1

Ripple’s stablecoin plan released on July 25, 2024, is an important manifestation of its strategic shift. This plan not only marks Ripple’s official layout in the stablecoin field but also brings new development opportunities for XRP Stablecoin. In the field of cross-border payments, the innovative application of stablecoins has tremendous potential. Traditional cross-border payment methods have many pain points, such as slow transaction speed, high fees, and long settlement periods. However, based on the efficient technical architecture of the XRP Ledger, XRP Stablecoin can achieve fast and low-cost cross-border payments. With an average transaction confirmation time of less than 5 seconds and extremely low transaction fees, with an average cost of about 0.0002 US dollars per transaction, XRP Stablecoin has significant advantages in cross-border payment scenarios. With the acceleration of global economic integration, the demand for cross-border trade and remittances continues to grow. XRP Stablecoin is expected to meet this market demand and become an important tool for cross-border payments.

In the field of decentralized finance (DeFi), XRP Stablecoin also has broad application prospects. The DeFi market has developed rapidly in recent years, with various blockchain-based financial applications emerging, such as decentralized exchanges, lending protocols, insurance, etc. XRP Stablecoin can serve as a store of value and medium of exchange in DeFi applications, providing users with more stable and efficient financial services. In decentralized exchanges, XRP Stablecoin can be used as one side of the trading pair to increase liquidity and efficiency; in lending protocols, users can use XRP Stablecoin as collateral to obtain loans and meet their funding needs. With the continuous development and improvement of the DeFi market, XRP Stablecoin is expected to play an important role in promoting the prosperity of the DeFi ecosystem.

5.2 Regional Policies and Market Acceptance

Brazil’s policy measures in the cryptocurrency field have provided strong support for the promotion and application of the XRP Stablecoin. On February 19, the Brazilian Securities and Exchange Commission (CVM) approved the Nasdaq XRP Index Fund provided by Hashdex, the country’s first spot XRP exchange-traded fund (ETF). The ETF will be listed on the B3 exchange, providing investors with a more convenient channel for XRP investment. This move not only reflects Brazil’s recognition of XRP, but also creates a favorable market environment for the development of XRP Stablecoin in Brazil.

At the same time, Braza Group plans to launch a stablecoin BBRL pegged to the Brazilian real on the XRP Ledger. The stablecoin is expected to be launched in the first quarter of 2025, initially targeting institutional clients and then expanding to the enterprise-to-consumer sector. The launch of BBRL has received support from the Central Bank of Brazil, with the President of the Central Bank of Brazil, Gabriel Galipolo, pointing out that the use of encrypted assets in Brazil has significantly increased in recent years, with stablecoins accounting for as much as 90% of encrypted currency circulation. The launch of the BBRL stablecoin will provide diversified payment tools for the Brazilian and Latin American markets, further promoting the facilitation of cross-border transactions. These policy and market dynamics indicate that Brazil is actively embracing the blockchain and cryptocurrency industry, providing a broad market space for the development of the XRP Stablecoin. With the gradual implementation of XRP ETF and BBRL stablecoin in the Brazilian market, XRP Stablecoin is expected to gain wider application and recognition in the region, driving an increase in its market share.

5.3 Technical Innovation and Application Expansion

The technological innovation such as Automated Market Maker (AMM) has brought new opportunities for XRP Stablecoin in the innovation of financial products and the expansion of application scenarios. AMM is a decentralized trading mechanism based on blockchain, which automatically determines asset prices and transaction execution through algorithms and smart contracts, thus improving trading efficiency and liquidity. In the application of XRP Stablecoin, AMM technology can provide a more flexible and efficient trading method. Through AMM, XRP Stablecoin can be automatically exchanged with other cryptocurrencies or assets, achieving instant transactions without relying on traditional order books and centralized exchanges. This not only improves the speed and efficiency of transactions, but also reduces transaction costs, providing users with a better trading experience.

Based on AMM technology, XRP Stablecoin can develop more innovative financial products. Liquidity mining projects can be built, where users provide liquidity for XRP Stablecoin and other assets to receive corresponding rewards; decentralized lending products can be developed, where users use XRP Stablecoin as collateral to obtain loans. These innovative financial products will further expand the application scenarios of XRP Stablecoin, attracting more users and investors to participate, and promoting the development and growth of the XRP Stablecoin ecosystem.

Six, Future Development Trends Forecast

6.1 Technical Evolution Direction

The XRP Ledger, as the underlying technology of the XRP Stablecoin, is expected to make breakthroughs in multiple key technical indicators in the future, providing stronger technical support for the development of the XRP Stablecoin. In terms of transaction efficiency, the current average transaction confirmation time of the XRP Ledger is less than 5 seconds, but with continuous technological evolution, there is potential to further shorten it to less than 2 seconds. By optimizing the consensus algorithm and network architecture, reducing communication latency between nodes, and improving transaction processing speed, this will make the XRP Stablecoin more competitive in instant payment scenarios and able to meet the high demands for transaction speed in more applications, such as high-frequency financial trading, real-time cross-border remittances, etc.

In terms of security enhancement, the XRP Ledger may introduce more advanced encryption algorithms and security mechanisms. The development of quantum computing technology poses a potential threat to traditional encryption algorithms. The XRP Ledger may proactively adopt post-quantum encryption algorithms to ensure the security of transaction data and user assets. Strengthening identity verification and access control for nodes to prevent malicious nodes from attacking the network will further enhance the system’s stability and reliability. These technological improvements will directly impact the market competitiveness of XRP Stablecoin, enabling it to attract more users and investors and expand its market share in the stablecoin market by leveraging more efficient and secure technological advantages when facing competition from other stablecoins.

6.2 Market Size and Application Expansion

The potential launch of XRP ETFs will bring significant opportunities for the market growth of XRP Stablecoin. Currently, more than 15 XRP ETF applications are under review by the SEC. Once these ETFs are approved and successfully listed, they will provide institutional investors and the general public with more convenient channels for XRP investment. The participation of institutional investors often brings in a large amount of funds, driving up the price of XRP, thereby enhancing the market acceptance and attractiveness of XRP Stablecoin. Based on historical experience, the launch of Bitcoin ETFs has significantly increased market demand for Bitcoin and led to a significant price increase. It is expected that the launch of XRP ETFs will also have a similar effect, attracting more funds into the XRP ecosystem, promoting the circulation and application of XRP Stablecoin, and driving rapid expansion of its market size.

Institutional support will also provide strong momentum for the expansion of XRP Stablecoin’s application scenarios. Ripple has established partnerships with numerous financial institutions, and as the cooperation deepens and expands, XRP Stablecoin is expected to be applied in more financial transactions. In the field of cross-border trade finance, XRP Stablecoin can serve as an efficient payment and settlement tool, reducing transaction costs, shortening settlement cycles, and improving the efficiency of fund utilization. In supply chain finance, combined with Internet of Things (IoT) technology, XRP Stablecoin can achieve synchronous circulation of goods and funds, enhancing the transparency and trust of the supply chain. With the continuous expansion of application scenarios, the market demand for XRP Stablecoin will further increase, driving its market size to continue growing.

6.3 The Impact on the Cryptocurrency Market

The development of XRP Stablecoin is expected to have a significant impact on the overall landscape of the cryptocurrency market. In terms of the competitive situation in the stablecoin market, currently USDT and USDC dominate the market, but XRP Stablecoin has the potential to break this situation with its unique technical advantages and application scenarios. The efficient transaction processing capability and low-cost characteristics of the XRP Ledger give it a clear advantage in areas such as cross-border payments, which can attract more users and institutions to choose XRP Stablecoin. As the market share of XRP Stablecoin gradually expands, it will create competitive pressure on existing stablecoin projects such as USDT and USDC, prompting them to continuously improve their technology and services, enhance their own competitiveness, and thus drive innovation and development in the entire stablecoin market.

The development of XRP Stablecoin may also have spillover effects on other cryptocurrencies. As a stablecoin, XRP Stablecoin can provide a more stable value storage and medium of exchange for the cryptocurrency market, reducing the overall volatility of the market. In times of significant market fluctuations, investors can transfer funds to XRP Stablecoin to preserve and hedge their assets. XRP Stablecoin can also serve as a bridge connecting traditional finance with the cryptocurrency market, facilitating the flow of funds between the two markets, providing more development opportunities for other cryptocurrency projects, and promoting the prosperity and development of the entire cryptocurrency market.

Conclusion

With the continuous development of global cross-border trade and the continuous growth of the DeFi market, if XRP Stablecoin can fully leverage its technical advantages and obtain more extensive applications in these areas, its market demand and value are expected to further increase. Investors can pay attention to the business expansion and cooperation progress of XRP Stablecoin in these areas, and look for potential investment opportunities. Technological innovation is also an important opportunity, and technological innovations such as AMM bring new development possibilities for XRP Stablecoin. Investors can pay attention to the application of related technologies and the development of innovative projects, layout in advance, and share the dividends brought by technological innovation.