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- The XRP Ledger’s clawback feature aims to correct inaccuracies where the ledger’s data conflicts with legal obligations.
- CTO David Schwartz clarifies that clawback is essential for fixing incorrect ledger entries, ensuring legal accuracy.
A tweet by XRPL DunL validator, Vet, highlighted a crucial discussion about the likely implementation of clawbacks for RLUSD beyond testing.
According to Vet, if the clawback feature is meant for RLUSD in a broader context, it would rely greatly on the adoption of XLS-73, which allows Automated Market Makers (AMM) to operate on the XRP Ledger.
If your digital asset is stolen there should be a way to retrieve it or possibly if it's sent to a wrong address. Those are the only 2 good reasons I can think of for clawback to exist. I agree with you that it exerts control and none of us want that in a new financial system.
— Kirk (@KirkAdams2022) August 10, 2024
This is an important topic because the XRP Ledger’s present infrastructure, particularly its allowed trustlines, differs from how equivalent methods, such as blocklisting in Circles USDC contracts on Ethereum, are handled.
Blocklisting accounts on Ethereum play an important function; however, the opposite process on XRPL may not be acceptable or sufficient in similar scenarios.
Vet emphasizes that while clawback-enabled tokens cannot currently be used in an AMM, they remain functional in the orderbook. This distinction makes it possible to launch RLUSD without immediate AMM support. Depending on how the project progresses, launching without AMM support may be a sensible and viable option.
Ripple CTO Clarifies Clawback’s Role in Upholding Ledger Accuracy
The conversation progressed when a user on X commented on Vet’s tweet, reiterating that clawback should be used only to recover digital assets that have been stolen or transferred to the wrong address.
Although these arguments are valid, the user agreed that the greater concern is the amount of control these processes exercise, which could be harmful to the principles of a decentralized financial system.
Many members of the community valued the notion of reducing control in emerging financial systems; therefore, this viewpoint struck a chord.
David Schwartz, CTO at Ripple, contributed to the topic by responding to the user’s comment. Schwartz highlighted that the primary motivation for clawback is to fix circumstances where the ledger is factually wrong. He stated:
“If a digital asset represents a legal obligation and the token says the legal obligation exists where the legal system says it doesn’t, the ledger is wrong.”
Previously, CNF reported that Ripple has started beta testing its Ripple USD (RLUSD) stablecoin on the XRP Ledger and Ethereum blockchains, with intentions to expand to other chains and DeFi protocols.
Ripple is collaborating with corporate partners to carefully test the stablecoin to ensure the greatest levels of security and efficiency.
Furthermore, we have noted that the technology company will pay a reduced $125 million SEC penalty within 30 days, confirming XRP’s non-security status.
Meanwhile, the price of XRP at the time of writing was approximately $0.5775, slightly up 0.15% over the last 24 hours. Its daily trading volume is up 34.02% to $1.504 billion.
