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Ripple provides digital asset infrastructure to financial institutions, including solutions developed to solve problems with traditional international remittances. Currently, Ripple is focusing on various developments using the XRP Ledger (XRPL), and in particular, its full-scale entry into the custody and stablecoin fields is attracting attention both inside and outside the industry.
Ripple has been fighting the SEC*1 in court for many years, but it is about to come to an end. How do you see the past few years of fighting the SEC?
David Schwartz (hereinafter David): It's been a few years since we had our worst Christmas. Although it's not perfect, we are quite satisfied with the progress of the lawsuit. On the day the lawsuit was filed, many of our employees were in the United States, and everyone was worried about what the future held.
I still remember that day as the worst. Because the US market is important to us, the US government tried to destroy what we had built. That's why we have been fighting for appropriate regulation, explaining to regulators that they are "trying to take innovation opportunities overseas."
At the same time, this lawsuit has been a trigger for us to shift our focus outside the United States. We are looking for a more innovative and open environment, and are moving a lot of our business outside the United States, where we can focus on development both in terms of payments and the technical aspects of blockchain.
As a region where Ripple is focusing, Southeast Asia seems to be particularly prominent.
David: Southeast Asia is a rapidly growing market and is about to play an important role in the global economy. In addition, many developers are in Southeast Asia and we feel the demand in the market, so we position it as an important region like Japan.
Ripple is preparing to enter the stablecoin field in earnest and issue its own stablecoin, "RLUSD." Please tell us the current situation and the approximate time of official launch.
David: Currently, RLUSD is being tested in a test environment. Here, we are checking and monitoring the entire flow, from issuance to transfer, redemption, and regulatory compliance. On the other hand, some of these flows depend on approval from regulatory authorities, which is not something we can control. Therefore, it is difficult to tell us the specific date and time of the official launch at this stage. We also want to avoid a situation where we move too quickly and are unable to keep up with the project's expansion.
Taking this into consideration, we are proceeding with the process in stages. At this point, we expect the main network to start operating within this year and to be in circulation in the US market. However, we want to emphasize that the first RLUSD issued will not be unlimited and available to everyone around the world. This will depend on the timing of regulatory approval, as I mentioned earlier.
What do you think about the possibility that the SEC lawsuit will have some impact on the approval and its timing?
David: I don't think the progress of the lawsuit will affect the approval of the stablecoin. In fact, I was surprised that the stablecoin launch was linked to a New York trust account. And the SEC lawsuit will not affect stablecoins backed by US dollars issued outside the US.
When you announced the stablecoin, you made a bullish statement that you were going to "win the market." What factors led to this confidence?
David: Looking back, that was a very bold statement (laughs). But I personally believe that we will win the stablecoin market.
We have extensive experience in enterprise business using blockchain for over 10 years. Because we have provided payment solutions for enterprises, we know how to build the software and technology required for that. This gives us great confidence.
We also have a strong balance sheet, which is a crucial weapon in issuing stablecoins. Given this, plus our extensive experience in providing payment solutions using blockchain and our New York trust license, we believe we are in a very good position. So, I don't see us disappearing from this market at all.
We plan to use these weapons and our connection to the XRP Ledger (XRPL) to become the industry's leading stablecoin. The stablecoin market is a very large and growing market. We also believe that we are in the perfect situation to launch a new product like this.
There are already strong competitors in the stablecoin market, such as USDT*4 and USDC*5. What strategy will Ripple adopt to confront these competitors?
David: First, the biggest point is that we issue through a New York trust license. Many of our competitors do not hold such licenses and will not be able to provide the same level of security for remittances as we do.
Also, transparency of reserve assets is important for issuing stablecoins. High levels of auditing standards will also be required. Currently, USDC may be higher than USDT in terms of transparency. We will ensure transparency that exceeds that. This is not limited to RLUSD, but the stablecoin market has two advantages for circulating new tokens.
The first is that the stablecoin market is growing rapidly, so we do not necessarily need to think about taking market share from competitors. The size of the entire stablecoin market will probably have expanded to about twice the size in a year. When that happens, the important thing is for us to expand our share in the same way as the stablecoin market expands in the future.
The second is the construction of DeFi※6. It is not a good thing to build the entire ecosystem with the funds of one company. For example, even if there is one Layer 1 blockchain, it is meaningless if it relies on a company or one token. Multiple tokens will be needed, and the true value of stablecoins will be realized in a decentralized market like DeFi.
Ripple recently announced the introduction of the sidechain "XRPL EVM Sidechain" and the addition of native smart contract functionality to XRPL. Please tell us the importance of these plans.
David: First, the XRPL EVM Sidechain is a sidechain that is compatible with the EVM (Ethereum Virtual Machine). This allows users to access and use wrapped XRP (eXRP) as a gas fee*7 or native token between other EVM-compatible blockchains.
Secondly, we are exploring native smart contract functionality for XRPL, which will provide a new experience for users and developers. XRPL currently has functions such as DEX, automatic market maker (AMM), NFT, and lending, but in reality it is not as perfect as we think it is.
However, the native smart contract feature will improve these conveniences and allow users to use the features they want. Currently, you cannot build your own DeFi service on XRPL itself, but the native smart contract feature will make it possible.
Until now, all you could build on XRPL was a user interface. But developers want to build their own products on XRPL. The introduction of native smart contract functionality not only meets the demand of these developers, but also gives them hope. This is extremely important.
From your perspective, what kind of market is Japan?
David: Japan has always been important to Ripple, and it is also an extremely important market for the cryptocurrency industry. The regulatory environment is stable, and we see it as an environment where it is easy to launch products. It is also impressive that a community has been built that allows people in the retail sector to use DeFi. XRP has also become a very popular cryptocurrency in Japan, and is in the top three traded in the region.
We partnered with SBI Group seven years ago to strengthen our marketing in Japan. Until then, Ripple did not have the expertise or resources to market in Japan. Initially, we partnered with Japanese financial institutions on payment introduction and marketing, but now we have expanded beyond that and have expanded to the use of XRP, NFT, and XRPL.
And about two months ago, we launched a fund to support developers in Japan and Korea. The purpose of this is to provide grants to developers, build partnerships, and support the community. We have already received many applications for this fund.
What do you think David's opinion is that the Japanese market can be improved and make it easier for overseas players to enter?
David: I don't think it necessarily needs to change. Because Japan is already a very popular market, and we ourselves have seen the high demand. The issue of tax on crypto assets is often discussed in the Japanese market, but that is the case in any country. Rather, the focus should be on the quality of the regulatory environment.
And what I felt when I looked at the Japanese market was that the community is roughly divided into people who want to develop, people who want to use DeFi, and people who are speculative. Personally, I hope to see more people focusing on building solutions that can solve problems, rather than speculative moves.
Please tell us about Ripple's goals, future prospects, and immediate plans.
David: Ripple's first focus is on DeFi products. In addition, we will continue to work on settlement and custody. We will also enter the stable coin field, and our mission is to provide these services seamlessly. Some people will want to tokenize real assets (RWA) and trade those tokenized assets. We will meet the demand of those people.
Meanwhile, our immediate challenge is to jump into the competitive stable coin market. We have experience in settlements, an excellent balance sheet, and a powerful weapon in the form of XRPL. We will continue to work hard to gain market share in the future by leveraging these.
*1: The United States Securities and Exchange Commission. An organization that oversees and monitors securities exchanges in the United States.
*2: A general term for crypto assets designed to achieve price stability.
*3: A public L1 block chain developed for fast, low-cost settlements. Ripple uses it for enterprise services such as Ripple Payments, and also develops open source.
*4: Tether. The world's first stable coin, developed in 2014.
Its price is linked to the US dollar, and the algorithm is set up so that 1 USDT = 1 USD.
*5: USD Coin. A stable coin linked to the US dollar that runs on Ethereum.
*6: Decentralized finance. A financial service that is provided autonomously and automatically, without the intervention of a specific administrator.
*7: Fees for using the blockchain
◉ David Schwartz
CTO of Ripple Labs Inc
CTO of Ripple and one of the original architects of the XRP Ledger. Prior to joining Ripple, he served as CTO at WebMaster Incorporated, a software development company in Santa Clara. He has a history of developing encrypted cloud storage and messaging systems for businesses for organizations such as CNN and the National Security Agency (NSA). Known by the nickname "Joel Katz," he is well-respected in the digital currency community.
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