Ripple’s Chief Technology Officer, David Schwartz, recently confirmed that the Ripple USD (RLUSD) stablecoin has the capacity to be temporarily halted or reversed in order to comply with legal or regulatory requirements.
Schwartz made this revelation following Senator Bill Hagerty's updating of the GENIUS Act, which now mandates stablecoin issuers to have technology in place that allows for freezing, seizing, or halting transfers when legally necessary.
The GENIUS Act, officially titled Guiding and Establishing National Innovation for US Stablecoins, was initially introduced in February. On March 10, Senator Hagerty presented an amended version of the bill that included significant changes, such as the requirement for permitted payment stablecoin issuers to have the ability to seize, freeze, burn, or prevent the transfer of issued payment stablecoins as needed by law.
Notable attorney Jeremy Hogan took to social media to raise concerns about the viability of implementing this rule. He pointed out the technological expertise required for stablecoin issuers to execute the proposed regulations effectively.
In response to Hogan’s query about the functionality of freezing stablecoins, Schwartz affirmed that indeed, RLUSD can be frozen or reclaimed if necessary to align with legal obligations and address external events that impact these obligations, such as court orders.
The recent activation of the clawback amendment on the XRP Ledger further supports this concept, allowing token issuers to reclaim tokens from specific wallets to ensure compliance with regulatory standards.
Furthermore, the GENIUS Act proposes federal oversight for stablecoin issuers with market valuations exceeding $10 billion, a criterion currently met by Tether (USDT) and USD Coin (USDC).
While RLUSD remains a relatively new stablecoin introduced by Ripple in late 2024 with a current market capitalization of 135.1 million, it is poised to operate under state regulations that align with federal standards outlined in the act.
In conclusion, the evolving regulatory landscape underscores the importance of stablecoin issuers having mechanisms in place, like those provided by Ripple technology, to adapt swiftly to legal requirements and uphold compliance within the digital currency ecosystem.