Ripple CEO: XRP and RLUSD Have Different Roles
Ripple CEO Brad Garlinghouse said Nov. 3 that XRP and RLUSD serve different functions, rejecting concerns that the dollar-backed stablecoin could replace XRP.
In a Nov. 3 response to XRP Ledger validator Vet, Ripple CEO Brad Garlinghouse described XRP and RLUSD as “complementary, not competitive.” He identified other stablecoins as RLUSD’s competitors.
Vet explained that XRP remains necessary for core XRP Ledger functions even when users transfer RLUSD. Each funded account currently requires a reserve of 1 XRP. Transaction fees are also paid in XRP and permanently burned.
An account holding RLUSD requires a trust line with the stablecoin’s issuer. That adds an owner reserve of 0.2 XRP, bringing the minimum reserve for an account with one trust line to 1.2 XRP. XRP has no issuer that can freeze balances, while RLUSD balances can be frozen by its issuer under applicable controls.
XRP can serve as an intermediary asset on the XRP Ledger’s decentralized exchange. The network can route a conversion through XRP when that provides a better rate than a direct exchange between two other currencies. This lets liquidity providers connect markets without supporting every possible currency pair.
RLUSD is designed to maintain a value of $1. It is backed by cash and cash equivalents and has redemption arrangements at a one-to-one dollar ratio. The stablecoin is used for dollar-denominated payments such as payroll, invoices, remittances and corporate treasury transfers.
XRP’s market price fluctuates, which can make it less predictable for payments requiring a fixed dollar value. RLUSD also operates on Ethereum, so increased use of the stablecoin does not necessarily increase activity on the XRP Ledger.
XRP Ledger transaction fees generally use a small amount of XRP. Demand for XRP on the network can also come from account and trust-line reserves, other ledger functions and XRP-based liquidity routing.
Reviewed and fact-checked by Alex Panasenko on November 4.
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