Ripple CTO Confirms RLUSD Stablecoin Can Be Temporarily Halted or Reversed

Ripple's Chief Technology Officer, David Schwartz, has confirmed that the Ripple USD (RLUSD) stablecoin can be temporarily halted or reversed

Senator Bill Hagerty (R-TN) has updated his GENIUS Act, which would create a regulatory framework for U.S. stablecoins. The new version of the bill, which was originally introduced on February 4, includes an amendment that requires stablecoin issuers to integrate technology enabling the freezing, seizure, or stoppage of transfers when mandated by legal authorities.

An earlier draft of the bill, spotted by crypto lawyer and influencer Gary Bowlus, contained an article on "Permitted Payment Stablecoin Issuer." This article, in part, reads:

The permitted payment stablecoin issuer shall segregate, in a manner to be determined by the Commission, the permitted payment stablecoin issuer’s own funds from the payment stablecoins issued by the permitted payment stablecoin issuer.

Hagerty’s updated bill, which was unveiled on March 10, adds another key change. The bill, in part, requires the permitted payment stablecoin issuer to:

seize, freeze, burn, or prevent the transfer of payment stablecoins issued by the permitted payment stablecoin issuer, in accordance with the instructions of the Treasury, in order to comply with the requirements of Title 12, Chapter 17.

Discussing the implications of the bill, attorney Jeremy Hogan raised a question about the practicality of the technology.

"So, can Ripple or Circle actually freeze RLUSD or USDC once it’s transferred. I didn’t think that was possible for either. But this bill says it MUST be possible. Which begs the question, HOW will it be possible?"

In response to Hogan, Ripple Chief Technology Officer David Schwartz confirmed that RLUSD can be temporarily halted or reversed to comply with legal or regulatory requirements.

"RLUSD can be frozen or clawed back. Balances on the ledger are the issuer’s legal obligation. We know that off-ledger events (e.g., court orders) can change or nullify those obligations. So the issuer must be able to update the ledger accordingly."

It should be noted that the XRP Ledger (XRPL) activated the clawback amendment in January following a 90% vote from its community. This change allows token issuers to retrieve tokens from wallets that have been deposited into Automated Market Maker (AMM) pools, which in turn helps maintain adherence to regulatory demands. Given that RLUSD is natively issued on both the XRP Ledger and Ethereum (ETH) blockchains, the clawback functionality applies to it as well.

The bill also allocates federal oversight to stablecoin issuers with market values over $10 billion. Currently, only Tether (USDT) and USD Coin (USDC) exceed this threshold.

Moreover, the act specifies that state regulators should continue to oversee stablecoins with lower market capitalizations and that the state regulator should follow a framework comparable to federal standards.

At the time of writing, RLUSD is a relatively new stablecoin. Its issuer, Ripple, launched it on December 17, 2024. In addition, BeInCrypto data shows that it currently has a market capitalization of $135.1 million.

Therefore, as per the act, it will remain under state regulation. However, the state should also follow a framework comparable to federal standards.