Ripple launches stablecoin; Tether invests in EU lifeboats

Ripple Labs’ new stablecoin is officially a thing, while Tether is investing in companies that can clear the compliance hurdles Tether finds so insurmountable.

On December 17, Ripple formally launched RLUSD, its new U.S. dollar-denominated stablecoin, following Ripple’s declaration of its intentions in April. The New York Department of Financial Services (NYDFS) officially added RLUSD to its Greenlist of approved coins alongside BTC, ETH, and stablecoins issued by Gemini, Paxos Trust, and PayPal (NASDAQ: PYPL).

Ripple said RLUSD is being issued on both the Ethereum network and Ripple’s own XRP Ledger, and will be “initially available on Uphold, Bitso, MoonPay, Archax, and CoinMENA, with additional listings on platforms such as Bullish, Bitstamp, Mercado Bitcoin, Independent Reserve, Zero Hash and others expected in the coming weeks.”

Notably absent from the above list are prominent U.S. exchanges Coinbase (NASDAQ: COIN), Kraken, and Gemini, which may or may not have qualms about listing competitors to their preferred stablecoins, including Circle’s USDC, which is issued via a Coinbase partnership, and Tether’s USDT.

Ripple CEO Brad Garlinghouse stated that his company picking NYDFS as its stablecoin regulator was “a deliberate choice” given the generally unforgiving reputation that NYDFS holds following years of enforcement actions against crypto firms.

These actions included ordering Paxos to distance itself from the Binance exchange, with which Paxos had partnered on the BUSD stablecoin. Binance had gone rogue by issuing a ‘pegged’ version of BUSD while neglecting to maintain adequate fiat reserves to ensure each of these pegged-BUSD’s was backed 1:1 with U.S. dollars.

Garlinghouse said the NYDFS stamp of approval would help position RLUSD to take advantage of the increased acceptance that stablecoins are expected to enjoy under Donald Trump’s second term as U.S. president. Trump has vowed to loosen regulatory constraints on all things’ crypto,’ including installing a friendlier chairman at the Securities and Exchange Commission (SEC), with which Ripple remains locked in litigation.

Ripple has pledged that RLUSD will be “fully backed by U.S. dollar deposits, U.S. government bonds, and cash equivalents.” Ripple will also publish “monthly, third-party attestations of RLUSD’s reserve assets, conducted by an independent auditing firm.”

Ripple also announced the addition of two more members to its stablecoin advisory board: Raghuram Rajan, former governor of the Reserve Bank of India, and Kenneth Montgomery, former VP/COO of the Federal Reserve Bank of Boston. Rajan and Montgomery join Sheila Bair (ex-chair of the Federal Deposit Insurance Corporation), David Puth (vice-chair of Partners Capital and ex-CEO of the defunct Centre Consortium), and Ripple co-founder Chris Larsen.

‘Please don’t FOMO into a stablecoin’

Ripple’s RLUSD announcement sparked a surge in the value of the company’s mainstay XRP token, which topped $2.70 at one point—a high not seen since January 2018—although it has since surrendered some of those gains. Stranger still, some overexcited Ripple fans were bidding ridiculous sums in an apparent bid to get their hands on the first RLUSD tokens to come down the chute.

At one point, someone appeared willing to pay the equivalent of US$1,200 to acquire a fraction of a single RLUSD, either unaware of or unconcerned by the fact that one RLUSD is worth one U.S. dollar. Ripple CTO David Schwarz sought to calm the waters by warning that, while “there may be supply shortages [of RLUSD] in the very early days … the price will come back to very close to $1 as soon as supply stabilizes.”

In what might be the quintessential comment on the ridiculousness that pervades everything in ‘crypto,’ Schwarz added the following plea: “If you want to spend a lot of money to get a tiny bit of RLUSD before anyone else does, you can. But please don’t expect the price to stay over $1 once things stabilize … Please don’t FOMO into a stablecoin! This is not an opportunity to get rich.”

USDT on EU life support

Ripple’s RLUSD has yet to receive approval under the European Union’s Markets in Crypto-Assets (MiCA) regulation, but a Ripple official claims the company is “actively exploring” methods by which it might legally play in the EU sandbox.

On December 13, Coinbase delisted USDT from its European-facing operations, as the exchange had promised to do in accordance with MiCA. Circle’s USDC received its MiCA approval this summer, but Tether has so far balked at fulfilling MiCA’s stablecoin obligations, including the requirement for ‘significant’ issuers to keep 60% of their fiat reserves in cash in local banks.

Other prominent exchanges—including Crypto.com, Kraken, KuCoin, and others—have yet to follow Coinbase’s lead in ditching USDT. Also not yet ridding itself of USDT is Binance, despite the exchange previously warning European users that the exchange would “restrict the availability” of non-compliant stablecoins ahead of MiCA’s full implementation on December 30. Binance also recently struck a partnership with Circle to promote USDC adoption that seemed to leave USDT squarely in Binance’s rearview mirror.

TetheR invests in StablR

While USDT may (for the moment) not be completely inaccessible in Europe, Tether recently put its EURT stablecoin in mothballs, seeing no future for the Euro-denominated token under MiCA. But Tether continues to look for ways to maintain relevance in this major market, including investing in a Dutch firm (Quantoz Payments) that plans to issue MiCA-compliant USD-/Euro-denominated tokens.

On December 17, Tether announced an investment in European stablecoin provider StablR, which received an Electronic Money Institution (EMI) license from Malta’s Financial Services Authority in July. StablR currently offers MiCA-approved Euro- (EURR) and dollar-denominated (USDR) stablecoins on the Ethereum and Solana chains. EURR currently has a market cap of just €3.2 million ($3.3 million), while USDR’s stats on the StablR site are currently, er, blank.

Tether CEO Paolo Ardoino claimed that the StablR investment “demonstrates our support for the European digital asset ecosystem.” Odd that Tether’s support doesn’t extend to getting USDT authorized to operate in the clear in the EU, but never mind.

In the meantime, StablR will utilize ‘Hadron by Tether,’ the company’s new tokenization platform. For those of you who skipped physics class, a hadron is a composite subatomic particle consisting of two or more quarks that refuse to submit their fiat reserves to an outside audit despite eight years of promises … hang on, we may have gotten our wires crossed here.

Anyway, Tether’s Hadron is intended to simplify the tokenization of real-world assets (RWAs), in part by providing “a comprehensive compliance toolkit” that is apparently insufficient to ensure USDT compliance in a highly regulated market like the EU.

‘Please check if you can pay tether’

Meanwhile, the use of USDT by individuals/entities under U.S. economic sanctions continues unabated. A recent Financial Times report—titled The criminal’s ‘go-to cryptocurrency’ has a new friend in the White House—offered a profile of Howard Lutnick, the founder of Wall Street financial services firm Cantor Fitzgerald (NASDAQ: ZCFITX) who was recently named Trump’s new Secretary of Commerce.

But the FT also quoted “emails leaked by Iranian opposition groups” regarding a 2023 visit to Tehran by Alexander Lukashenko, president of Belarus. Lukashenko has been the target of sanctions issued by the U.S., U.K., EU, and Canada for rigging Belarusian elections, supporting Russia’s invasion of Ukraine, human rights abuses and more.

According to the emails, a representative of Iran’s Safiran Airport Services was contacted by a Russian official named Elena ahead of Lukashenko’s Tehran trip looking to “arrange diplomatic clearance for the presidential plane, book five-star hotel rooms for his entourage, and handle other logistics.”

When it came time to discuss how Lukasheko would pay for these services—Safiran was also under sanctions for ferrying Iran-made drones to Russia for use against Ukraine—a Safiran staffer had a simple request for Elena: “Please check if you can pay tether.”

Cantor settles SEC charges

Getting back to Cantor for a moment, last week saw the company agree to pay $6.75 million to settle Securities and Exchange Commission (SEC) charges that two special purpose acquisition companies (SPACs) under Cantor’s control made misleading statements to investors ahead of their initial public offerings (IPOs). Cantor neither admitted nor denied the SEC’s findings but chose to settle regardless.

Interestingly, one of the companies named in the complaint is Satellogic, which specializes in ‘Earth-observation satellites.’ In April, Tether took a $30 million stake in Satellogic, yet Tether appears to have made no mention of the investment on its website, in contrast to its other highly public investment choices both within the fintech world and in other business sectors.

Lutnick has claimed that Cantor custodies the over $100 billion in U.S. Treasury bills allegedly backing up the bulk of issued USDT, a service for which Cantor undoubtedly derives significant fees. The Wall Street Journal (WSJ) recently reported that Lutnick/Cantor had negotiated a deal to acquire ~5% of Tether.

The WSJ report also quoted associates of Tether owner Giancarlo Devasini saying Devasini had told them that Lutnick would “use his political clout to try to defuse threats facing Tether.” Said threats include the possibility of unsealed indictments for facilitating a variety of crimes, including the aforementioned sanctions evasion.

Closing on a high

On December 17, BVNK—a U.K.-/EU-registered electronic money institution (EMI) that provides businesses with stablecoin-based payment infrastructure—announced that it had raised $50 million in Series B funding in a round led by Kathy Haun’s Haun Ventures, with the help of Coinbase Ventures, Scribble Ventures, DRW Venture Capital, as well as from existing investors Avenir and Tiger Global.

BVNK currently processes $10 billion in annualized volumes for its business partners and is now eyeing expansion into the U.S. to take advantage of the “growing regulatory clarity” following Trump’s inauguration next month. BVNK spent 2024 “building out our U.S. team, local banking infrastructure, and operational licenses,” and is now opening a San Francisco office and “establishing a presence” in New York ahead of an expected U.S. launch in January.

BVNK co-founder/CEO Jesse Hemson-Struthers said interest in his company surged after payment processor Stripe paid $1.1 billion to acquire BVNK’s rival stablecoin payment startup Bridge this October. Hemson-Struthers told Fortune that “every competitor of Stripe is coming to us saying, ‘Stripe’s done this, how can we get involved in the space now?”

For the record, DRW Venture Capital is an offshoot of the Chicago-based DRW Trading Group, which also counts Tether’s biggest customer (Cumberland Global) as its offshoot. Cumberland was recently accused by the SEC of “operating as an unregistered dealer in more than $2 billion of crypto assets offered and sold as securities” since March 2018.

We thought we’d get through a single stablecoin update without any controversy. Oh, well… New Year’s resolution?

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