Is XRP a Stablecoin? (Beginner Breakdown)

What Is a stablecoin? 

A stablecoin is a cryptocurrency designed to maintain a stable value. Typically, stablecoins like USDT and USDC are pegged to the US dollar.

While cryptocurrencies like BTC and ETH often have volatile price swings, stablecoins are designed to have stable value. That means they’re easy to use for payments. 

Because XRP is not pegged to the US dollar or any other asset, it’s not considered a stablecoin. 

What is XRP and how does it work? 

The XRP Ledger was designed to make it easier and cheaper to make cross-border transfers. 

To better understand how this works, let’s imagine a bank in Japan that wants to send money to a bank in Brazil.  Today, this process takes several days and comes with significant fees. XRP has a different model: convert Japanese yen to XRP, then convert XRP to Brazilian real on the other end. The whole process is completed in seconds, costing less than a penny! 

Is XRP a stablecoin? 

XRP is the native cryptocurrency of the XRP Ledger. 

It is not a stablecoin, and its price changes based on supply and demand. The value of XRP often fluctuates based on market sentiment, regulatory news, or broader crypto trends.

For XRP to work, it doesn’t need to have a stable value. It just needs to move quickly enough that price fluctuations during the transfer are minimal. 

Why do people call XRP a stablecoin? 

RLUSD (Ripple USD) is the Ripple blockchain's actual stablecoin, launched in 2024 and pegged 1:1 to the US dollar through reserves held by Ripple. Unlike XRP, RLUSD is designed to maintain a stable value. 

While XRP is a great choice for institutions that wish to do cross-currency transfers (eg, dollars to Japanese Yen), RLUSD is often used by institutions and individuals that primarily deal in dollars. 

Remember, XRP and RLUSD are separate assets. However, when people hear "Ripple stablecoin," they sometimes incorrectly assume that XRP is a stablecoin.

Do I need to pay taxes on XRP? 

Yes, XRP transactions are taxable in the United States. 

Selling or disposing of XRP is subject to capital gains tax. You incur a capital gain or loss depending on how the price of your XRP has changed since you originally received it. 

Conclusion

XRP is not a stablecoin. It’s a volatile cryptocurrency designed to facilitate fast, low-cost cross-border payments. 

Meanwhile, RLUSD is a stablecoin pegged to the US dollar. 

While both assets are tied to the XRP Ledger, it’s important to understand that they are separate assets with different use cases.