Stablecoins: look at the promise behind the token

A business receiving payment usually wants to know what it can spend afterwards. If the asset received changes value sharply before the next invoice falls due, a quick transfer may still create an awkward cash-management problem.

Stablecoins seek to address that need by targeting a reference value, often a national currency. For a dollar-backed token, the central economic question is how a holder gets from a digital balance to usable dollars.

What supports the target?

Ripple describes RLUSD as a dollar stablecoin backed by dollars and cash equivalents in segregated reserve accounts. Its transparency page publishes reserve information and monthly independent accountant attestations.

Those are relevant documents to examine. They are different from an unconditional assurance that every transaction will work in every circumstance.

An attestation addresses specified assertions and a reporting period. A reader should examine its date, scope and any qualifications. A headline reserve figure does not describe every operational dependency or every route by which a holder might sell or redeem a token.

RLUSD and XRP are different assets. Ripple is the company associated with RLUSD; the XRP Ledger is a public network that supports issued tokens as well as its native XRP.

Read the redemption conditions

New York's Department of Financial Services issued dollar-stablecoin guidance on 8 June 2022. Its scope is specific: dollar-backed stablecoins issued under its supervision by regulated entities.

The guidance addresses reserves, redemption policies and attestations. It also recognises conditions such as a holder completing the issuer's onboarding requirements before redeeming. These provisions should not be casually described as rules covering every stablecoin everywhere.

That distinction has a practical consequence. Holding a token through an exchange and redeeming directly with its issuer may involve different processes. Before relying on either, a business would need to establish which route it can actually use.

Transfer speed and access to money

Imagine a hypothetical importer receiving a dollar token late on a Friday. The token transfer may be complete, but the next question is whether the importer can use that balance for Monday's obligations.

The answer depends on the receiving arrangements: a supplier willing to accept the token, an exchange route, or redemption into a bank account. Each route has its own conditions and dependencies.

This is an analytical example, not a claim about RLUSD's performance. It shows why a stablecoin evaluation should follow the whole cash journey. Fast transfer, a stable market price and dependable redemption are related objectives, but they are not identical.

Our tokenisation guide explains the broader point: a digital representation is useful only when its underlying rights and operations work.