Ripple CTO David Schwartz Answers Question About RLUSD Stablecoin's Clawback Feature

Ripple CTO David Schwartz recently addressed an important question about Ripple's RLUSD stablecoin. His response clarified why RLUSD can be frozen or clawed back

In a recent conversation on X, David Schwartz, the CTO of Ripple, addressed a key question about Ripple’s RLUSD stablecoin. The question arose from legal expert Jeremy Hogan’s discussion on a proposed stablecoin bill.

Hogan, known for his insights into blockchain technology and cryptocurrency, shared his thoughts on a new bill that aimed to regulate stablecoins. The bill proposed tying stablecoins closely to a bank account, rendering them useless if the account was frozen.

One X user, surprised by this proposal, brought the question to Schwartz, asking if a token like RLUSD or USDC could be frozen after being transferred.

Schwartz confirmed that while tying a token to a bank account was possible, it wasn’t the case with RLUSD. He explained that a token could be frozen or “clawed back” if the issuer had a legal obligation to do so.

“The issuer’s legal obligations must always be reflected correctly, and off-ledger events, such as court orders, can change these obligations,” Schwartz stated.

XRPL validator ‘Vet’ joined the discussion, adding that both Ethereum and the XRP Ledger allowed for a token to be frozen or subjected to clawback if required by law enforcement or a court order.

“This is how they can cooperate with authorities, like freezing funds from known criminals,” Vet explained.

The clawback function permitted Ripple, in its role as the issuer, to recall tokens in cases of fraud, criminal activity, or if tokens were mistakenly sent to the wrong address.

This aligns with Schwartz’s statement, showcasing how this feature was designed to ensure legal compliance and maintain transparency and security in the operation of the XRPL.

Earlier this year, in January, the XRP Ledger approved an amendment for issuers to be able to claw back tokens in specific instances. This amendment also ensured that frozen tokens could not be deposited into AMMs.

With this amendment in place, RLUSD can now be traded directly on the XRP Ledger’s decentralized exchange (DEX), offering more flexibility in trading while remaining compliant with legal frameworks.