Ripple Confirms RLUSD Can Be Frozen for Regulatory Purposes

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.

Schwartz’s statement comes after Senator Bill Hagerty updated the GENIUS Act. The bill requires stablecoin issuers to implement technology that allows freezing, seizing, or stopping transfers when legally mandated.

Ripple Technology Enables Freezing of RLUSD Stablecoin

The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act was introduced on February 4. On March 10, Senator Hagerty unveiled an amended version of the bill, which included 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 took to social media platform X (formerly Twitter) to question the bill’s practical implications. He particularly stressed the technological capabilities required for stablecoin issuers to implement the proposed rule.

“So, can Ripple or Circle actually freeze RLUSD or USDC once it’s transferred? I didn’t think that was possible for either,” Hogan posted.

In response, Schwartz confirmed that this is indeed possible. 

“RLUSD can be frozen or clawed back,” he answered. 

Schwartz clarified that this functionality is essential to ensure that the balances on the ledger remain aligned with the legal obligations of the issuer. Since off-ledger events, like court orders, can change or nullify those obligations, it’s important for issuers to have the ability to update the ledger as needed.

It should be noted that in January, the XRP Ledger (XRPL) activated the clawback amendment. This followed a 90% vote from its community. 

This change allows token issuers to retrieve tokens from wallets that have been deposited into Automated Market Maker (AMM) pools. This, in turn, helps maintain adherence to regulatory requirements. Given that RLUSD is natively issued on both the XRP Ledger and Ethereum (ETH) blockchains, the clawback functionality applies to it as well.

The bill also stipulates federal oversight for stablecoin issuers with market values exceeding $10 billion. At present, only Tether (USDT) and USD Coin (USDC) meet this threshold. 

Meanwhile, RLUSD is a relatively new stablecoin. Ripple launched it on December 17, 2024. In addition, BeInCrypto data shows that it currently has a market capitalization of 135.1 million.

Therefore, as per the act, it will remain under state regulation. However, the state should also follow a framework comparable to federal standards.