Stablecoin Divide: Ripple's Defense of Tether Raises Questions

Ripple's former CTO, David Schwartz, has defended Tether's decision to freeze $42.4 million in USDT before receiving a formal court warrant.

The move has put a spotlight on the control that stablecoin issuers have over their assets, and how they can be used for compliance with law enforcement requests.

Schwartz argued that Tether had little practical choice but to secure the assets while competing ownership claims were unresolved, highlighting the importance of issuer control in maintaining stability within the stablecoin ecosystem.

The Same Question Applies to RLUSD

Ripple's own RLUSD terms explicitly reserve broad powers to freeze digital addresses, allowing Ripple to blacklist wallets holding RLUSD when required by law or under its internal compliance policies.

This makes Schwartz's defense of Tether less surprising than it first appears, as both USDT and RLUSD are issuer-backed stablecoins that rely on the issuer retaining administrative control to remain compliant with sanctions, fraud investigations, and court orders.

XRP Is the Important Contrast

The distinction becomes much sharper with XRP itself, which is the native asset of the XRP Ledger rather than an issued stablecoin. XRPL documentation makes clear that freeze and clawback functionality applies to issued tokens, not XRP.

Schwartz has previously emphasized the same point: Ripple cannot blacklist an XRP holder or reverse a valid XRP transaction once the network has finalized it.