Ripple, the issuer of XRP, has unveiled its plans to launch a stablecoin backed by the United States dollar, aiming to rival Circle and Tether in capturing a portion of the market share within the next five years.

In a conversation with Cointelegraph, Ripple's Chief Technology Officer, David Schwartz, shared insights into the upcoming stablecoin, which is expected to debut on both the XRP Ledger and the Ethereum blockchain.

Having contemplated the idea of launching a stablecoin for over a year, Schwartz expressed his belief that the current stablecoin ecosystem lacks diversity and robustness. With the current market value of stablecoins estimated at $150 billion, Schwartz sees significant room for another major player, stating, "We think it will be over $2 trillion by 2028, and there’s only two market leaders. We don’t think it’s a winner-take-all-all ecosystem, particularly on the DeFi side."

The Ripple stablecoin will maintain a 1:1 peg with the U.S. dollar, with the company planning to secure the tokens with U.S. dollar deposits, short-term U.S. government Treasuries, and "other cash equivalents." Schwartz emphasized that Ripple's approach will prioritize compliance, drawing inspiration from Circle's stringent adherence to regulatory standards and aiming to directly compete with the USD Coin issuer, saying, "Our angle is going to be very ‘compliance-first.’ We’re very transparent about how the assets are backed, so we’re kind of going to be directly competing against USDC."

Schwartz explained Ripple's strategy of focusing on market share acquisition rather than taking unnecessary risks with customer funds. He underlined the intention to back the stablecoin with assets that will be audited by a third-party accounting firm, with Ripple committing to releasing monthly attestations. Drawing parallels with the early days of Tether's USDT stablecoin, Schwartz highlighted initial concerns about issuer integrity and reserve transparency, noting that over time, Tether gained credibility as a long-term player in the stablecoin space.

Schwartz clarified that Ripple's network, Ripplenet, supports non-bank payment firms using XRP for transparent transactions while launching a new stablecoin alongside XRP's role in real-time gross settlement systems, currency exchange, and remittance networks. However, there are markets where XRP may not be accessible or where additional liquidity is required, prompting the introduction of a Ripple stablecoin to enhance customer experience.

Lastly, Schwartz emphasized that the Ripple stablecoin will complement the ecosystem's recently launched automated market maker, providing liquidity and enabling the capture of volatility and arbitrage opportunities across various assets.