XRP Ledger Establishes $1 Trillion Trust Limit for Ripple USD (RLUSD)

• A significant event on the XRP Ledger involved setting a $1 trillion trust limit for Ripple USD (RLUSD), though no actual issuance of RLUSD has occurred yet.
• This action serves as a preparatory framework for future transactions, reflecting the XRP Ledger’s scalability and users’ confidence in the ecosystem.

Popular crypto analyst Amelie has brought the XRP community’s attention to a significant event taking place on the XRP Ledger. As tweeted by Amelie, the XRP Ledger has set a new trust limit of $1 trillion in Ripple USD (RLUSD).

WOW! 💥

A new trust limit of $1 trillion in “RLUSD” was just set on the #XRPL 💸 pic.twitter.com/m3PlWUrw7Y

— 𝓐𝓶𝓮𝓵𝓲𝓮 (@_Crypto_Barbie) August 14, 2024

Let’s first understand the concept of Trust lines and Trust limits on the XRP Ledger. A trust line helps the user build a trusted relationship with the currency issuer on the XRP Ledger. After setting up the trust line, users enable the recei[t of the issuer’s currency up to a certain predefined limit also known as the trust limit. This limit basically safeguards users from receiving more of the currency than they are willing to trust.

In the case of Ripple, a trust line was created for RLUSD, setting up the trust limit of $1 million. This figure represents the maximum amount of RLUSD the account holder is willing to trust. However, there’s no RLUSD transfer or creation in the process. Instead, this action simply establishes the framework for future transactions involving RLUSD on the ledger.

Last week, Ripple started beta-testing the RLUSD stablecoin facilitating cross-border transactions between the XRP Ledger and Ethereum, reported CNF.

XRP Ledger Implications and Community Reaction

The $1 trillion trust limit even in the absence of the actual asset shows high flexibility and scalability of the XRP Ledger. Also, the ability of users to reach such high trust limits shows the potential and trust value that users hold for the XRP ecosystem. However, this development also prompts questions about the role trust lines play in the issuance and circulation of digital assets on the XRP Ledger.

With Ripple expanding its range of products and services including the introduction of the RLUSD stablecoin, it becomes increasingly crucial to understand the technical workings of the XRP Ledger. RLUSD will compete in the highly competitive stablecoin landscape currently dominated by Tether’s USDT and Circle’s USDC, reported CNF.

Interestingly, this announcement of the $1 trillion trust limit has also sparked some reactions from the community. Many users were actually curious to under the purpose behind this trust limit. One community member Aron Madarasz confused it with some illicit activity stating: “It means that this is a fake. RLUSD isn’t issued yet. This is a trustline on the XRPL everybody can create, and everybody can name it as wanted. RLUSD will be issued by Ripple on the ledger but not as a trustline thing.”

Madarasz clarified that while a trust line for RLUSD has been established, Ripple has not yet issued the asset. As a result, the substantial trust limit set does not represent an asset currently in circulation. Rather, it serves as a preparatory measure within the XRPL, while enabling users to set up trust lines in anticipation of RLUSD’s future issuance.

As of press time, the XRP price is trading o.62% down at $0.5645 with a market cap of $31.7 billion. Per the CNF report, there’s been large whale activity for XRP with some analysts predicting god candles ahead in the making.