In his latest YouTube video analysis, Adam Cochran, partner at Cinneamhain Ventures (CEHV), an activist venture capital firm, described Ripple’s newly launched stablecoin, RLUSD, as a “Trojan horse” that could transform both decentralized finance (DeFi) and and classic banking sectors.

Why Ripple’s RLUSD is a ‘Trojan Horse’

Cochran emphasized the strategic importance of RLUSD, stating: “Ripple has quietly dropped a bombshell and no one is really talking about it, but it could radically revolutionize Ripple’s position in the market.” He explained that while the cryptocurrency community remains focused on XRP price movements and upcoming programmability improvements, RLUSD represents a fundamental shift in the XRP Ledger (XRPL) ecosystem.

RLUSD distinguishes itself from other stablecoins by adhering to exacting regulatory standards. Cochran emphasized: “RLUSD is not just another USDC clone; it is more like the original Paxos stablecoin, regulated by the NYDFS, issued by a custodian and backed by safe cash assets.”

The stablecoin is backed only by real U.S. cash equivalents held in U.S. banks that are registered with regulators and subject to regular audits. This regulatory compliance ensures that RLUSD meets stringent money transfer licensing, including the Virtual Asset Service Provider (VASP) license, so it can be used by exchanges and banks in the EU.

Unlike other stablecoins such as Tether (USDT), RLUSD will be issued on both the XRP Ledger platform and the Ethereum blockchain. Cochran noted, “Ripple is making sure they capture this themselves and can add more value to the ecosystem.”

Cochran posits that RLUSD is integral to unlocking the massive, multi-trillion-dollar Forex markets on the blockchain without the need for advanced technological improvements. “This stablecoin will unlock the ability for real-world asset (RWA) issuers, forex issuers, currency issuers and other programs to price their US dollar assets on a native AMM,” he noted.

The introduction of RLUSD is expected to facilitate the valuation of US dollar assets directly in XRPL’s Automated Market Maker (AMM), thereby attracting institutional trading and Forex clearing activities. Cochran explained: “Ripple can start to benefit from the incoming profit and put it back into the XRP ecosystem.” He suggests that a stablecoin could raise liquidity on an on-chain that is currently confined to foggy exchange balances:

“Sophisticated participants do not want to have an AMM that trades on Ripple as a base currency. They want to be able to value their assets in US dollars, and until the introduction of RLUSD this was impossible. This stablecoin will unlock the ability to use RWA assets, Forex issuers, currency issuers and other programs […] to enable Ripple to transfer a large portion of its overall liquidity to the chain.”

Ripple has long targeted institutional clients, including banks, financial institutions and forex traders. Cochran emphasized the importance of regulatory compliance, stating: “If Ripple manages to gain MA compliance approval and be offered in the EU and introduce this stablecoin to various markets, it will have a great opportunity to get these providers to integrate the Ripple network by offering them on -the yield of the chain and the division of this yield.”

Moreover, the company’s strategic focus on programmability through upcoming features such as Hooks and the Ethereum Virtual Machine (EVM) sidechain is expected to further enhance the utility of RLUSD. “Ripple still really needs EVM hooks and sidechains to function well and provide programmability to be able to offer more sophisticated DeFi products,” Cochran stated.

The global stablecoin market, currently dominated by Tether (USDT) and USD Coin (USDC), presents a significant opportunity for RLUSD, especially in the EU where the regulatory framework is stringent. Cochran estimated: “If Ripple were to issue the same number of stablecoins as Tether currently does, it would expect a potential yield increase of around $5 billion per year.”

Cochran further pointed to the competitive advantage that RLUSD can provide to Ripple, stating: “These are the type of asset issuers that take care of risk-weighted asset issuance, forex settlement and exchange […] something that no one else in the DeFi space has the expertise, stakeholders or tools to be able to provide.”

Cochran concluded his analysis by confirming Ripple’s strategic trajectory: “Ripple has a great potential path ahead if it continues to execute on its vision in the way it wants.”

At the time of publication, the price of XRP was $2.51.

Featured image from YouTube, chart from TradingView.com