Developers are embarking on the testing phase of the proposed XRP Ledger Lending Protocol, as announced by Ripple on Monday. This initiative, pending approval from network validators, promises to empower participants within the XRP Ledger (XRPL) to leverage digital assets that are currently idle.
The dual upgrade, which encompasses two technical specifications, XLS-65 and XLS-66, aims to introduce a native credit infrastructure directly to XRPL, offering a new avenue for financial firms to arrange on-chain agreements. If validated, this upgrade would facilitate the use of tokenized real-world assets (RWAs)—like money market funds and commodities—formerly sitting as static inventory across various network accounts, allowing them to function as working capital.
Ripple’s announcement details that the XRPL Lending Protocol operates with two core components. The “Single Asset Vault” establishes a standardized framework for pooling assets, while the “Lending Protocol” governs loan terms, servicing components, and repayment mechanisms. Notably, the underwriting process will remain off-chain, allowing lenders to maintain control over the assessment of a borrower’s creditworthiness. This design aligns with traditional financial systems, enabling XRPL to accommodate a broader array of credit structures over time rather than being locked into a single lending model.
Additionally, while the protocol facilitates predefined rules for repayment schedules, interest rates, and default conditions once a loan is made, it also employs a multi-tiered strategy for managing losses from defaults. Capital from pool managers and underwriters is at risk first, mirroring practices in conventional finance.
Ripple compared its initiative to existing public lending protocols like Aave, which have demonstrated the viability of on-chain lending at scale. However, the company contended that these crypto-native governance structures and risk frameworks do not effectively align with Wall Street’s risk management standards.
The potential applications of the dual upgrade are extensive. For instance, it would enable payment providers to access short-duration liquidity and allow treasury teams to generate revenue by lending digital assets under more explicit terms. This upgrade follows a significant achievement in May when Ondo Finance successfully executed the first cross-border, cross-bank redemption of tokenized U.S. Treasuries on the XRPL. Ripple described this new lending functionality as the essential “missing layer” in on-chain finance, positing that the transition of an asset to on-chain status alone does not complete the financial process.
Furthermore, the XRPL Lending Protocol is expected to enhance the utility of Ripple’s stablecoin, RLUSD, which has achieved a market capitalization of $1.5 billion since its launch in late 2024, as reported by CoinGecko.
In tandem with these developments, XRP’s market performance reflects broader market trends. As of Monday, XRP traded around $1.05, representing an 8.2% decline over the past week. Notably, last Thursday marked a significant drop for the cryptocurrency, reaching its lowest value since November 2024, just a cent shy of the dollar mark, further correlated with Bitcoin’s recent downturn.
