- RLUSD’s clawback feature ensures compliance by allowing freezing or reversal under legal mandates.
- The GENIUS Act requires stablecoin issuers to implement transaction control mechanisms for regulatory oversight.
Ripple’s Chief Technology Officer, David Schwartz, has confirmed that the Ripple USD (RLUSD) stablecoin can be frozen or reversed to meet legal and regulatory requirements. His statement follows amendments to the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which mandates stablecoin issuers to implement technology allowing them to halt or alter transactions when required by law.
Schwartz explained that the clawback functionality ensures compliance by aligning ledger balances with legal obligations. This feature was enabled after a community vote on the XRP Ledger (XRPL), reinforcing Ripple’s commitment to regulatory adherence.
Ripple’s Clawback Feature and Regulatory Compliance
Schwartz’s confirmation came in response to a discussion on X (formerly Twitter) initiated by attorney Jeremy Hogan. Hogan questioned whether stablecoin issuers like Ripple and Circle could freeze or claw back tokens after they were transferred. Schwartz responded that RLUSD can be frozen or clawed back, clarifying that this capability is necessary to keep ledger balances consistent with legal requirements.
The clawback functionality was officially activated on the XRP Ledger in January 2024, following a 90% community approval. It allows token issuers to retrieve assets, particularly those mistakenly deposited into Automated Market Maker (AMM) pools. This measure helps prevent liquidity issues and maintains compliance with financial regulations. As previously mentioned in our report, the feature ensures that Ripple can act per court orders and other legal obligations.
Ripple’s RLUSD is natively issued on both the XRP Ledger and Ethereum (ETH) blockchains, meaning the clawback feature applies across both networks. A validator supporting the XRP Ledger network, known as Vet, confirmed that Ripple could enforce this function if required by law enforcement or judicial rulings.
How Clawback Works in Stablecoins
The GENIUS Act, first introduced on February 4, 2025, and amended in March, requires stablecoin issuers to incorporate mechanisms for freezing, burning, or preventing transfers under legal orders. This regulation primarily targets issuers with market values exceeding $10 billion, such as Tether (USDT) and USD Coin (USDC). However, RLUSD remains under state oversight due to its smaller market capitalization of $135.1 million.
In a recent update, we covered how the XRP Ledger’s AMMClawback amendment introduced restrictions to prevent frozen tokens from entering AMM pools. This update ensures that issuers can retrieve tokens while preserving decentralized exchange (DEX) liquidity. The clawback function also enhances legal transparency, preventing fraudulent activity and ensuring compliance with evolving financial regulations.
Crypto users have debated the implications of clawback functionality. While some argue it undermines decentralization, others see it as a necessary safeguard. Regulatory bodies increasingly require such features to enforce accountability and reduce financial risks.
The XRP Ledger has also integrated with RWA.xyz, a platform that provides real-time tracking of tokenized assets. This collaboration enhances market transparency, allowing institutions to monitor RLUSD and other tokenized assets more effectively. The system supports compliance by offering insights into asset movements and stablecoin liquidity.
