Ripple’s XRP stablecoin encounters massive headwinds ahead

Ripple recently announced that it is planning to enter the stablecoin industry. Given its 33 billion dollar market cap, the news made waves across the market.

While the announcement was perceived positively, it also came with a silent admission that XRP was not meeting the payment industry expectations. Ripple created XRP to conduct global cash and trade movement via financial institutions.

The network even joined hands with Banco Rendimento, Lemonway, and SABB. However, most of these partners do not primarily use XRP for payments. A major reason for this is Ripple’s volatile nature.

Thus, Ripple’s launch of a stablecoin is a natural step for the network. The crypto service provider announced that the stablecoin will be backed by USD in a 1:1 ratio. Moreover, short-term US government treasuries, cash equivalents, and USD deposits will fund the stablecoin.

Ripple’s latest move also bodes well for developers trying to go public. Stablecoins generate funds through interest and transaction costs. Interest is generated when a stablecoin issuer purchases government or corporate bonds.

On the contrary, transaction costs occur when users either trade using Staticcoin or send it to other accounts. As a result, most stablecoins generate massive fortunes via both methods. Interest has been the primary choice for many since the rates currently prevail at a 20-year high.

In addition to creating revenue, Ripple is developing a stablecoin that can be utilized in a variety of sectors. NFT and DeFi are essential components of Ripple’s strategy because they will be used in the XRP Ledger utility.

As much buzz as Ripple creates with its stablecoin news, there is reason to believe it can fail. The stablecoin market has become highly saturated and competitive over the years.

Moreover, stablecoins released by massive companies have failed to gain market share in the past few years. Thus, Ripple will have to overcome huge hurdles to make a significant mark in the industry.