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Ripple Labs, the cryptocurrency group accused of selling unregistered securities, is to launch a stablecoin as a revival in the price of bitcoin draws investors back to the digital asset market.
The US group said on Thursday it would create a token that it hopes will allow asset managers and banks to trade securities on blockchains.
Markus Infanger, senior vice-president at Ripple, said the token could act as a “portal” that bridges the divide between traditional capital and cryptocurrency markets.
Ripple’s move into the stablecoin market comes after bitcoin hit a record high of $73,000 this year. US regulatory approval of new stock market funds that invest directly in bitcoin has fuelled gains for cryptocurrencies more broadly and spurred a new wave of venture capital into speculative projects.
The San Francisco company is battling a lawsuit from the US markets regulator, which has for years pursued the company over the legality of its own currency, XRP. Last month the Securities and Exchange Commission filed for $2bn in penalties from Ripple for selling unregistered securities. Ripple has strenuously fought the claims in court.
Stablecoins are a form of digital cash akin to chips in a casino, allowing holders to easily switch between trading on different markets. They are usually pegged to sovereign currencies and the majority of trading in crypto markets is done with stablecoins.
“Our assessment of the market shows very clearly stablecoins are playing an important role,” Infanger said. “They’re here to stay and they’ve been growing significantly, and we firmly believe the growth will continue to be very strong.”
The $150bn stablecoin market is dominated by Tether, which is registered in the British Virgin Islands and has faced questions over the backing of its $105bn of tokens in circulation. According to the UN, Tether is also increasingly becoming a conduit for money launderers and fraudsters to move funds outside the global banking system.
Financial institutions have been exploring using blockchains to trade digital versions of assets like stocks and bonds but the move has yet to take hold. Critics argue that crypto is poorly suited to trading traditional assets.
Infanger said that banks and asset managers are “beyond the point of deploying pilots and innovation. They really want to start to solve real financial friction using forms of tokenised real world assets.”
Ripple said its stablecoin, which will be launched later this year, would be based in the US, pegged 1:1 to the US dollar and fully backed by dollar deposits, short-term Treasuries, and other cash equivalents.
“Ripple has been and will remain very much compliant,” Infanger said, adding that “a stablecoin’s core [unique selling point] is simply trust, we fully recognise that”.
The group is also moving into an increasingly competitive market. Earlier this week, Nick van Eck, the son of investment manager Jan van Eck, raised $12mn to launch a stablecoin, while payments company PayPal and French bank Société Générale both launched their own stablecoins last year.
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