Ripple has introduced a new lending proposal for the XRP Ledger that could allow banks, payment providers and other financial institutions to borrow against tokenized assets.
The proposed XRP Ledger lending protocol would help institutions access liquidity without selling their digital assets. Ripple believes the upgrade could strengthen the network’s role in institutional finance and real-world asset tokenization.
Ripple Introduces Native Lending on the XRP Ledger
Ripple’s proposed lending protocol aims to solve a major weakness in blockchain-based finance.
Although tokenization has made it easier to issue, transfer and settle digital assets, blockchain networks still lack mature credit infrastructure. According to Ripple, transferring assets on-chain is only one part of a functioning financial system.
Traditional markets also depend on lending, collateral, liquidity and risk management. Therefore, Ripple wants the XRP Ledger to support loans backed by tokenized assets.
The protocol could potentially support tokenized government bonds, stablecoins, money market funds, commodities, private credit and other real-world assets.
Credit Decisions Would Remain Off-Chain
Under the proposal, financial institutions would continue making lending decisions and completing compliance checks outside the blockchain.
Once lenders and borrowers agree on the loan terms, the XRP Ledger would manage the execution process. This would include interest calculations, repayments, loan servicing and default management.
Ripple explained that the structure was intentionally designed to keep credit assessment off-chain while standardizing loan execution on-chain.
This approach could give financial institutions greater control over compliance and risk while still benefiting from blockchain-based settlement and automation.
Two Main Parts of the Lending Protocol
Ripple’s proposal includes two primary components.
The first is a Single Asset Vault, which would combine one type of asset into a pool that could be used for lending.
The second is the Lending Protocol, which would manage loan creation, servicing and repayment.
Ripple said separating asset storage from lending activity reflects the structure of traditional capital markets. In conventional finance, custody services and lending infrastructure usually operate independently.
How Financial Institutions Could Use the Protocol
Ripple provided an example involving a payment company holding reserves in RLUSD, its US dollar-backed stablecoin.
The payment provider could use those reserves as collateral to obtain a short-term loan while completing cross-border transactions.
This would allow the company to access temporary liquidity without selling its assets or relying on potentially expensive bank credit facilities.
As a result, the lending protocol could make cross-border settlements more efficient while helping institutions preserve their existing asset positions.
Compliance Would Be Built Into the System
Ripple also emphasized that compliance would remain an important part of the proposed framework.
Both lenders and borrowers would need to complete verification checks before using the protocol. Access to lending markets would be permissioned through digital credentials.
This model could help regulated financial institutions participate in XRP Ledger lending while meeting identity, compliance and risk-management requirements.
The protocol would also introduce a structured method for handling losses. Ripple said first-loss capital could be placed at the facility level instead of automatically spreading losses across every participant.
XRPL Validators Must Approve the Proposal
The proposed lending features are outlined in XLS-65 and XLS-66.
However, the upgrades are not yet active on the XRP Ledger. They must first receive approval from XRPL validators before they can be implemented on the main network.
In the meantime, developers and infrastructure providers can begin testing the lending framework on the XRP Ledger devnet.
If approved, the protocol could expand the XRP Ledger beyond payments and token transfers by introducing institutional lending backed by tokenized assets.
