Ripple’s (XRP) RLUSD Approval; Why USDT, USDC Fail To Comply?

Ripple’s (XRP) Stablecoin RLUSD Approval; USDT, USDC Lag Behind

Ripple’s (XRP) RLUSD Launch: What Sets The Stablecoin Apart?

The CEO of Ripple Labs recently ended speculations about getting approval from the New York Department of Financial Services (NYDFS) to launch RLUSD. Brad Garlington confirmed that they’ve actually received the rumored approval. As a result, XRP price surged, fueling the Ripple rally.

The event is extremely significant because it brings ensured trustworthiness. However, what makes RLUSD so very special remains a question, that too, when competitors like USDT and USDC already exist.

Why is the Stablecoin RLUSD Special?

Getting approval from NYDFS to launch the stablecoin comes as RLUSD fully complies with the four US financial regulators. The four important regulators of finance in the US are US GAAP, Basel III, FDIC and Federal Reserve Rules and the Dodd-Frank Act.

GAAP refers to a set of accounting rules used in the US financial reporting. Basel III refers to a set of procedures designed on Banking Supervision by the Basel Committee. Procedures that mainly aim at improving risk management of banks were initially developed post the 2007 US financial crisis.

As per experts, RLUSD has the backing of onshore US assets such as Treasury bonds and operate sunder real-time audits, to make it a suitable coin for US GAAP as well as Basel III. 

To comply with US GAAP means that the stablecoin has a clear value and also passes impairment testing. Again, to comply with the BAasel III indicates that the RLUSD meets the required liquidity and risk-weighting standards.

Coming to the last two financial regulators, the stablecoin RLUSD also complies with FDIC and Federal Reserve Rules and the Dodd-Frank Act. Compliance with the former ensures that the stablecoin secures assets under regulated custody. And that with the latter shows its transparency enhancement with an oversight for financial instruments.

Note that the Dodd-Frank Wall Street Reform and Consumer Protection Act is actually a legislation passed by the US Congress after the financial crisis of 2007. Its main principle is making the markets transparent. 

What Sets RLUSD Above USDT and USDC in the Race?

While USDT has not been successful in complying with the basic audit needs, it does not meet the standards of the US GAAP and Basel III. The reserves of the stablecoin USDT are known to include liquid or high-risk assets.

Talking of USDC, it might better than USDT in terms of transparency, however, it can’t compete with RLUSD being party offshore. Offshore operations prevent full compliance with US regulations. 

Conclusion

RLUSD will now be the first-ever stablecoin to be held by the US banks. It has not only set a new benchmark for stablecoins to meet the stringent US regulatory standards, but has also paved way for a better stablecoin future in terms of both security and transparency.