Why Ripple’s RLUSD Is A ‘Trojan Horse’

In his latest video analysis on YouTube, Adam Cochran, partner at Cinneamhain Ventures (CEHV), an activist venture capital firm, described Ripple's newly launched stablecoin

Adam Cochran, partner at Cinneamhain Ventures (CEHV), an activist venture capital firm, described Ripple’s newly launched stablecoin, RLUSD, as a “Trojan Horse” poised to transform both decentralized finance (DeFi) and traditional banking sectors.

In his latest video analysis on YouTube, Cochran highlighted the strategic significance of RLUSD, stating, “It’s something that no one’s really talking about but it could dramatically revolutionize the position of Ripple in the marketplace.” He elaborated that while the crypto community remains largely focused on XRP’s price movements and its upcoming programmability upgrades, RLUSD marks a fundamental shift within the XRP Ledger (XRPL) ecosystem.

Crucially, RLUSD differentiates itself from other stablecoins by adhering to stringent regulatory standards. As Cochran noted, “RLUSD isn’t just another USDC clone; this is getting more into the original Paxos stablecoin that’s NYDFS regulated, custodian issued, backed by secure cash assets.”

The stablecoin is exclusively backed by real US cash equivalents, which are held in US banks that are registered with regulators and subject to regular audits. This regulatory compliance ensures that RLUSD meets stringent monetary transfer licenses, including a Virtual Asset Service Provider (VASP) license, which would enable its use by EU exchanges and banks.

Furthermore, unlike other stablecoins such as Tether (USDT), RLUSD is set to be issued on both the XRP Ledger and the Ethereum blockchain. In Cochran’s words, “Something that stood out to me is that while it’s being issued on the XRPL, Ripple is making sure they themselves capture it and can provide more value into the ecosystem.”

According to Cochran, RLUSD is integral to unlocking the vast multi-trillion dollar Forex markets on the blockchain without the need for advanced technological upgrades. “This stablecoin is going to open up the ability for real-world asset (RWA) issuers, Forex issuers, currency issuers, and other programs to be able to price on a native AMM their assets in the US dollar,” he remarked.

With the introduction of RLUSD, assets can be priced in US dollars directly on the XRPL’s Automated Market Maker (AMM), which is expected to attract institutional trading and Forex settlement activities. As Cochran elaborated, “This opens up the possibility for a yield to come back into the XRP ecosystem, which Ripple can begin to benefit from and put that back into the ecosystem.”

He suggests that the stablecoin could ultimately enhance liquidity on-chain, which is currently limited to opaque exchange balances:

“What we’ve seen is that sophisticated participants don’t want to have an AMM that trades against XRPA as the underlying currency. They want to be able to price their assets in the US dollar and until the launch of RLUSD that was something that wasn’t possible. But now, this stablecoin is going to open up the ability for RWA assets, Forex issuers, currency issuers and other programs […] to allow Ripple to bring a lot of their overall liquidity on-chain.”

It is worth noting that Ripple has consistently targeted institutional clients, including banks, financial institutions and Forex traders, in its strategic initiatives. Cochran highlighted the importance of regulatory compliance in this regard, stating, “If Ripple can get their MA compliance approved and be offered in the EU and bring this stablecoin to diverse markets, they have a great opportunity to get these providers to integrate Ripple’s Network by offering them on-chain yield and sharing of that yield.”

Moreover, the company’s focus on programmability through upcoming features like Hooks and an Ethereum Virtual Machine (EVM) sidechain is expected to further enhance RLUSD’s utility. “Ripple still really needs hooks and their EVM sidechain to perform well, get the programmability in place to be able to offer more sophisticated DeFi products,” Cochran noted.

In conclusion, Cochran’s analysis underscores the significant opportunity presented by RLUSD within the global stablecoin market, which is currently dominated by Tether (USDT) and USD Coin (USDC), particularly in the EU with its stringent regulatory frameworks. As Cochran estimated, “If Ripple was to issue the same amount of stablecoins as Tether does nowadays, they’d be looking at something like $5 billion a year potentially in yield gains.”

Crucially, Cochran also highlighted the competitive edge that RLUSD could provide to Ripple, stating, “These are the type of asset issuers that care about RWA issuance, Forex settlement and interchange […] something that no