CBDCs and Stablecoins Like USDC Eye XRP Ledger Amid Clawback Amendment Consensus

The XRP community has begun touting the arrival of CBDCs and stablecoins like USDC on the XRP Ledger (XRPL) as the Clawback amendment reaches validator consensus.

Validators on the XRP Ledger have voted to pass the XLS-39 amendment, which seeks to introduce the Clawback feature on the blockchain network. The amendment attained validator consensus four months after it was introduced.

Data from XRPScan, a leading XRPL explorer, shows that the amendment has reached 85.71% validator consensus, surpassing the required 80% threshold.

For context, an amendment on the XRPL can only pass if it achieves 80% validator consensus for two consecutive weeks.

XRPScan data reveals that 30 out of 35 validators voted Yea to the XLS-39 amendment, while 5 validators opted for Nay.

Among the most notable validators that voted in favor of the amendment are Ripple, XRPL explorers Bithomp and XRPScan, and crypto exchange Bitrue.

Despite crossing the required validator consensus threshold, the XLS-39 amendment is still not live on the XRP Ledger. Notably, the amendment is expected to be implemented on Feb. 8 at 14:32 (UTC).

What is the Clawback Feature?

The Clawback feature, introduced by RippleX developers last October, gives more control and security to the developers who create and issue tokens on the XRP Ledger.

The feature allows the developers to take back tokens from users in some situations, such as when there is fraud or when a user forgets their password. This feature is optional, and developers can choose to use it or not, depending on their needs and the laws of their countries.

It interacts with Trustlines by adding a flag to them. The flag indicates to the users if the token issuer can use the Clawback feature or not. Users can check the flag for this information before they decide to use the token.

Difference Between Clawback and Freeze

RippleX noted that the Clawback feature is similar to Freeze, which already exists on the XRP Ledger. The Freeze feature allows the token issuer to stop the users from using their tokens if there is any illegal or harmful activity. 

While both features are meant to protect the token issuer and the users from scams and attacks, they do this through different means. Freeze only stops the users from accessing the tokens in their balance, while Clawback completely takes the tokens off their balance.

The Ripple CTO David Schwartz previously emphasized the similarity between both features, noting that he initially thought Clawback was redundant since the XRPL already had the Freeze feature. 

However, he confirmed that he supports the Clawback feature because it is more surgical than Freeze, which he likened to a “nuclear option” when combatting fund misuse. He also noted that Clawback could be preferable in some legal instances.

Significance of the Clawback Feature

As the Clawback feature inches closer to implementation, members of the XRP community have expressed excitement due to the implications. Notably, with the feature, banks looking to issue CBDCs on the public XRPL can do so safely, as they would now have control of their tokens.

The 'Clawback' feature for the XRPL is almost at 80%.

Remember, the banks NEED clawbacks on the XRPL.

Without it, the banks can't have control over these CBDC's on the XRPL.

And as we all know, banks like to have control.

If you want CBDC's on the XRPL, this is needed. pic.twitter.com/PyEcf0eXyA

— ? ???? ????? ? (@KingDoggoXRP) January 23, 2024

Notably, while the XRP Ledger is home to several CBDC projects, including those of Palau and Bhutan, these projects reside on private ledgers and not the public XRPL. The Clawback feature could pave the way for the leverage of the public ledger for CBDCs.

In addition, stablecoin issuers such as Circle, the firm behind USDC, can also issue their stablecoins on the XRP Ledger. David Schwartz noted that all the blockchains that are home to mainstream stablecoins have some features similar to Clawback.