The Reasons Why RLUSD Can be Frozen? This is What Ripple Says!

Bittime - One of the stablecoins that is currently hotly discussed is Ripple USD (RLUSD). Recently, Ripple's Chief Technology Officer (CTO), David Schwartz confirmed that RLUSD can be frozen, why?

So RLUSD freezes will happen if necessary to comply with legal regulations. So, what is the real reason behind this? Let's discuss it further!

Why Can RLUSD Be Frozen?

The answer is closely related to the new regulations mentioned GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins).

The law was updated by Sen Bill Hagerty and require stablecoin issuers like Ripple to implement technology that enables:

• Freezing funds
• Asset confiscation
• Termination of transfer

This is done to ensure that stablecoins continue to operate within legal corridors and are not used for illegal activities.

Ripple Explains RLUSD Freeze

In a discussion on social media platform X (formerly Twitter), a lawyer named Jeremy Hogan questioned whether Ripple and other stablecoin issuers like Circle (USDC) actually has the ability to freeze or recall transactions that have already occurred.

In response to this, David Schwartz answered firmly:

“RLUSD could be frozen or withdrawn” David Schwartz said.

He explained that this feature is very important so that the balance recorded on the ledger remains in accordance with the legal obligations of the stablecoin issuer.

If there is a court order or new regulation that changes these legal obligations, then the ledger will also need to be updated.

What is the RLUSD Freezing Mechanism?

Ripple has adopted the clawback feature in XRP Ledger (XRPL) last January. This feature is approved by 90% of the community and allows token issuers to withdraw tokens from certain wallets in case of misuse or legal orders.

Because RLUSD is published on the XRP Ledger and blockchain Ethereum (ETH), this clawback feature also applies to RLUSD.

What is the Impact on RLUSD Users?

For regular users, this freezing ability may sound worrying. However, keep in mind that this feature is not to limit user freedom, but rather to comply with regulations and prevent misuse of stablecoins.

On the other hand, RLUSD has not yet reached a capitalization value of $10 billion, so GENIUS Act regulations do not yet fully regulate it at the federal level.

Currently, RLUSD remains under state regulation, but states are also required to follow standards comparable to federal regulations.

Conclusion

The reason RLUSD can be frozen is to comply with regulations such as the GENIUS Act and ensure balances remain in accordance with applicable laws. Ripple has emphasized that this feature is important in maintaining stablecoin stability and compliance in the crypto ecosystem.

However, for investors and users of RLUSD, it is important to always understand the applicable rules and consider the risks before using this stablecoin.

FAQ RLUSD

1. Why can RLUSD be frozen?

RLUSD could be frozen because GENIUS Act regulations require stablecoin issuers like Ripple to have a freeze feature to prevent misuse or violations of the law.

2. Can all RLUSD transactions be frozen?

No, only transactions related to legal or regulatory orders can be stopped or withdrawn. Ordinary users can still make transactions as usual.

3. Is RLUSD riskier than other stablecoins?

Not really. In fact, this feature makes RLUSD more secure and legally compliant, although some users may feel uncomfortable with the possibility of freezing.

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References

crypto news, Beincrypto.com, accessed March 16, 2025

crypto news, Passionategeekz.com, accessed March 16, 2025

Author: Fkey