Overview
- Ripple announced that developers are initiating tests for the XRP Ledger Lending Protocol.
- Pending validation from network validators, this dual upgrade will enable users to utilize previously idle digital assets.
- XRP's market price recently reached its lowest point since November 2024.
On Monday, Ripple revealed that XRP’s blockchain is progressing toward facilitating direct borrowing and lending of digital assets for institutions. Developers can now begin testing the XRPL Lending Protocol.
In a blog entry, Ripple described how two key specifications, XLS-65 and XLS-66, aim to bring native credit infrastructure to the XRP Ledger (XRPL), offering financial institutions a fresh method to manage agreements on-chain.
Once validated by network validators, this dual upgrade will permit the deployment of tokenized real-world assets (RWAs) like money market funds and commodities as usable capital on XRPL, rather than leaving them as idle inventory in numerous network accounts.
The XRPL Lending Protocol consists of two main components: the “Single Asset Vault,” which standardizes asset pooling on XRPL, and the “Lending Protocol,” which establishes terms for loans, servicing details, and repayment procedures.
Ripple specified that the underwriting process is managed off-chain. This means that the methods used by lenders to assess a borrower’s creditworthiness are not recorded on XRPL, allowing institutions to maintain control over their lending choices.
“This separation mirrors real financial infrastructure,” explained Ripple. “By maintaining that distinction, XRPL can accommodate a broader spectrum of credit models in the future, rather than embedding a single lending framework into one application.”
However, the stipulations concerning repayment schedules, interest rates, and default scenarios are governed by preset rules once a loan is initiated, Ripple noted. Furthermore, in the event of defaults, losses are structured in a way that prioritizes capital from pool managers and underwriters, similar to traditional finance practices.
Ripple cited lending protocols like Aave as examples. While these protocols have demonstrated that lending can function on-chain at scale, Ripple contends that their governance structures and risk management do not align with the practices typical on Wall Street.
The company provided several scenarios enabled by the dual upgrade, including allowing payment providers to secure short-term liquidity and enabling treasury teams to earn revenue by lending digital assets under more defined terms.
This lending protocol development follows a significant event in May when Ondo Finance utilized the XRPL to complete the first cross-border redemption of tokenized U.S. Treasuries between banks. Ripple described this new lending upgrade as the essential “missing layer” in on-chain finance, asserting that transferring an asset to the blockchain is just part of the solution.
The introduction of the XRPL Lending Protocol could enhance the utilization of Ripple’s stablecoin on-chain, which has reached a market capitalization of $1.5 billion since its launch in late 2024, as reported by CoinGecko.
On Monday, XRP was trading at approximately $1.05, reflecting an 8.2% decline over the week. Last Thursday, the cryptocurrency dropped to its lowest level since President Donald Trump’s reelection, nearing a dollar, in tandem with Bitcoin.