Better Stablecoin Play: XRP vs. Ethereum

Key Points

• Stablecoins are a critical cryptocurrency segment that's growing fast.

• Ethereum holds a large portion of the existing stablecoin value on its chain.

• XRP's chain has a handful of features that could make it more efficient to hold stablecoins than elsewhere.

• 10 stocks we like better than XRP ›

Stablecoins, cryptocurrency's equivalent to digital fiat currency, have quietly become crypto's cash drawer and settlement layer, worth $277 billion in value as of early September. If that stablecoin pie keeps growing, the chains that efficiently host them should accrue value over time.

If you want exposure to that growth, Ethereum (CRYPTO: ETH) or XRP (CRYPTO: XRP) aren't stablecoins themselves but they do support that asset type as tokens on their blockchains. So which crypto is the better way to build a stablecoin-adjacent position? Today's answer and the long-run answer may not be the same, so let's dive in.

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Scale begets more scale

Right now, Ethereum hosts the largest pool of on-chain dollars by a wide margin, with roughly $154 billion of stablecoins circulating on its network. That dominance matters because issuers, apps, and institutions prefer to launch where the liquidity already lives.

Two dynamics will likely reinforce that lead. First, the sector itself is expanding; as of Jan. 1, 2021, all stablecoins in existence were worth around $27.5 billion, $20.6 billion of which was on Ethereum at that time. Second, Ethereum remains decentralized finance's (DeFi's) center of gravity, which increases the number of places those digital dollars can be put to work.

One issue is that regulatory compliance on Ethereum is largely a "bring your own controls" model. That tooling can meet stringent rules, but it lives at the smart contract and service layer rather than in the base protocol itself. So it's not the most convenient to implement from the perspective of users.

For investors, that means near-term growth likely continues to favor Ethereum, with more circulating stablecoins, more venues, more asset issuers, and plenty of compliant paths even if they are modular. The default option usually wins the next dollar of adoption.

XRP's pitch for stablecoins

XRP's network is smaller in terms of its stablecoin value parked on-chain today, with roughly $171 million in stablecoins on the XRP Ledger (XRPL), but the composition is telling. Ripple's own stablecoin, RLUSD, is already a top share of that pie.

Separately, other stablecoins like USDC are now live natively on XRPL, giving banks, fintechs, and developers a familiar, regulated dollar equivalent right on the ledger. Ripple's RLUSD is issued on both XRPL and Ethereum, showing that it's pursuing a cross-network strategy while anchoring utility on XRPL.

Where XRP differentiates is the base-layer compliance controls issuers can rely on without stitching together a stack. That design lowers operational friction for regulated programs.

On top of that, XRPL's roadmap now includes a native credentialing layer to attest compliance status directly on-chain, moving identity closer to the protocol rather than keeping it purely at the application tier. And that's precisely the direction compliance-heavy issuers like financial institutions have been asking for all along.

XRP's broader investment thesis is about payments, not just DeFi. Ripple's cross-border stablecoin payment offering spans 90 markets and more than 55 currencies, a sign that these rails are already plugged into real corridors where settlement speed and cost matter. If stablecoin policy tightens in major jurisdictions, the networks that make compliance easiest for large programs could win share from the default chains.

This one is a tough call

So which is the better stablecoin play? The truth is that either of these assets could see a lot of growth.

If you want the most direct exposure to where today's stablecoin float lives, Ethereum is the decisive near-term choice. Capital will continue to accrue in the place where it's already overwhelmingly based.

But, assuming stablecoin legislation continues to crystallize in the U.S. and abroad, it might narrow the field toward chains that make regulated issuance and transfer easiest. And that's where XRP could surprise to the upside over a multiyear horizon.

Suppose you are willing to underwrite some execution and regulatory risk in exchange for upside tied to institutional payments and on-chain compliance becoming mandatory rather than optional. In that case, XRP is the (longer-term and somewhat less certain) bet.

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Alex Carchidi has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum and XRP. The Motley Fool has a disclosure policy.