tl;dr
Ripple's Chief Technology Officer, David Schwartz, has confirmed that the Ripple USD (RLUSD) stablecoin can be temporarily halted or reversed to comply with legal or regulatory requirements. This confirmation comes in response to the GENIUS Act, which requires stablecoin issuers to implement technol...
Ripple's Chief Technology Officer, David Schwartz, has confirmed that the Ripple USD (RLUSD) stablecoin can be temporarily halted or reversed to comply with legal or regulatory requirements. This confirmation comes in response to the GENIUS Act, which requires stablecoin issuers to implement technology that allows freezing, seizing, or stopping transfers when legally mandated. The bill also stipulates federal oversight for stablecoin issuers with market values exceeding $10 billion, a threshold currently only met by Tether (USDT) and USD Coin (USDC). RLUSD, a relatively new stablecoin, falls under state regulation due to its market capitalization of $135.1 million. The XRP Ledger's clawback functionality, activated in January, allows token issuers to retrieve tokens from wallets, aligning with regulatory requirements.
Senator Bill Hagerty updated the GENIUS Act, requiring stablecoin issuers to implement technology for freezing, seizing, or stopping transfers when legally mandated. Attorney Jeremy Hogan questioned the practical implications of the bill, and Ripple's CTO confirmed that RLUSD can be frozen or clawed back to align with legal obligations.
The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act was introduced on February 4, and on March 10, Senator Hagerty unveiled an amended version of the bill, including several key changes. The bill "requires the permitted payment stablecoin issuer to seize, freeze, burn, or prevent the transfer of payment stablecoins issued by the permitted payment stablecoin issuer."
Attorney Jeremy Hogan raised concerns about the bill's practical implications, particularly stressing the technological capabilities required for stablecoin issuers to implement the proposed rule. Ripple's CTO, David Schwartz, confirmed that freezing or clawing back RLUSD is indeed possible. Schwartz emphasized that this functionality is essential to ensure that the balances on the ledger remain aligned with the legal obligations of the issuer, especially in response to off-ledger events, such as court orders.
In January, the XRP Ledger (XRPL) activated the clawback amendment, following a 90% vote from its community. This amendment allows token issuers to retrieve tokens from wallets, maintaining adherence to regulatory requirements. RLUSD is natively issued on both the XRP Ledger and Ethereum (ETH) blockchains, and the clawback functionality applies to it as well.
The bill also stipulates federal oversight for stablecoin issuers with market values exceeding $10 billion, a threshold currently only met by Tether (USDT) and USD Coin (USDC). RLUSD, being a relatively new stablecoin launched by Ripple on December 17, 2024, with a market capitalization of $135.1 million, falls under state regulation as per the act.