XRP Ledger Nears Institutional Lending Capabilities with New Protocol Test
San Francisco, CA – The XRP Ledger (XRPL) is moving closer to enabling direct on-chain borrowing and lending of digital assets for institutions, as Ripple announced Monday that developers can now begin testing the XRPL Lending Protocol in a sandbox environment.
In a blog post, the company detailed two technical specifications, XLS-65 and XLS-66, which are designed to integrate native credit infrastructure directly into the XRPL. This development aims to offer financial firms a new method for structuring agreements on the blockchain.
Pending approval from network validators, this dual upgrade would allow tokenized real-world assets (RWAs), such as money market funds and commodities, to be utilized as working capital on the XRPL. Currently, these assets often exist as static inventory across numerous network accounts.
The XRPL Lending Protocol is built on two core components. The “Single Asset Vault” provides a standardized framework for pooling assets on the XRPL, while the “Lending Protocol” governs loan terms, servicing, and repayment mechanisms.
Ripple clarified that the underwriting process will remain off-chain. This means that the assessment of a borrower’s creditworthiness will not be recorded on the XRPL, a design choice intended to give institutions control over their lending decisions.
“This separation mirrors real financial infrastructure,” Ripple stated. “By preserving that distinction, XRPL can support a wider range of credit structures over time, rather than hard-coding one lending model into a single application.”
Despite the off-chain underwriting, repayment schedules, interest calculations, and default conditions will operate under predefined rules once a loan is initiated. Furthermore, losses stemming from defaults are designed to be contained through a multi-tiered approach, prioritizing the risk of capital from pool managers and underwriters, a structure that mirrors traditional finance.
Ripple drew a comparison to public lending protocols like Aave, acknowledging their success in facilitating large-scale on-chain lending. However, the firm argued that these protocols’ crypto-native governance and risk frameworks do not align with the risk management procedures favored by Wall Street.
The company highlighted potential use cases for the dual upgrade, including enabling payment providers to access short-duration liquidity and allowing treasury teams to generate revenue by lending digital assets under more transparent terms.
This new lending protocol follows a significant milestone for the XRPL in May, when Ondo Finance utilized the network for the first cross-border, cross-bank redemption of tokenized U.S. Treasuries. Ripple described the new lending upgrade as the “missing layer” for on-chain finance, asserting that simply moving an asset onto the blockchain is only part of the equation.
The XRPL Lending Protocol is also expected to boost the on-chain usage of Ripple’s stablecoin. Since its launch in late 2024, RLUSD has achieved a market capitalization of $1.5 billion, according to CoinGecko.
On Monday, XRP was trading around $1.05, marking an 8.2% decrease over the past week. Last Thursday, the cryptocurrency experienced a notable dip, falling to its lowest point since President Donald Trump’s reelection, briefly touching just under a dollar, mirroring a broader market trend influenced by Bitcoin’s performance.
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