XRP holders can now borrow RLUSD stablecoin through a $280 million lending pool without selling their XRP, using wrapped XRP as collateral.
XRP holders can now borrow the RLUSD stablecoin on the Ethereum blockchain without selling their XRP assets, thanks to a new lending pool valued at $280 million. This initiative was launched by Flare, a blockchain platform that facilitates the use of XRP in decentralized finance.
Utilizing Wrapped XRP for Loans
On Monday, Flare announced that its wrapped XRP (FXRP) has been approved as collateral by Sentora, which manages the lending pool for Ripple's RLUSD stablecoin. Users can now use their wrapped XRP as collateral to secure loans in RLUSD, establishing a dedicated FXRP/RLUSD market on Morpho Blue. This allows XRP holders to leverage their assets without needing to liquidate them, and access to the market requires no special permissions.
Sentora performed a comprehensive evaluation of FXRP's performance and liquidity before granting collateral approval, ensuring that the asset is regularly monitored alongside other collateral types in the pool.
However, the borrowing process is intricate. Users must mint FXRP through Flare's FAssets system, bridge it to Ethereum using Stargate, and then deposit it into the lending market to borrow RLUSD based on their loan-to-value ratio. Flare is working on simplifying this process with the development of Smart Accounts, which would allow users to manage borrowing directly from their XRP Ledger wallets.
Hugo Philion, Flare's co-founder and CEO, highlighted the potential of XRP in the DeFi sector, noting that institutional endorsement of FXRP on Ethereum represents a significant milestone. He pointed out that the isolated market structure on Morpho Blue means that issues within the FXRP market will not impact the overall lending pool.
Despite this advancement, scalability remains a concern. Since launching, around 155 million FXRP tokens have been minted, which is below Philion's target of integrating 5 billion XRP into Flare's ecosystem within six months. The new lending market has a conservative initial supply limit, which may be adjusted as demand grows.
CoinDesk has reached out to Flare and Sentora for further information regarding the lending market's parameters, including supply cap, loan-to-value ratios, and liquidation thresholds, and will provide updates as they become available.
