Ripple has unveiled a proposed lending protocol for the XRP Ledger that would allow financial institutions to borrow digital assets without selling their holdings, expanding the network’s institutional finance capabilities.
Summary
- Ripple has proposed an XRP Ledger lending protocol for institutional borrowers and lenders.
- The system lets institutions borrow digital assets without selling token holdings.
- The proposal now awaits XRP Ledger validator approval after devnet testing.
According to a proposal published by Ripple, the new XRP Ledger Lending Protocol is designed to fill what the company describes as a missing piece in blockchain-based finance. While tokenization has simplified the issuance and transfer of digital assets, Ripple argues that lending, collateral management, and credit infrastructure have not advanced at the same pace.
The proposal would support lending markets for tokenized U.S. Treasuries, money market funds, stablecoins, commodities, private credit, and other real-world assets on the XRP Ledger.
Rather than embedding credit decisions into blockchain code, Ripple said lenders and borrowers would negotiate loan terms and complete compliance checks off-chain before transactions move to the network for execution.
Credit decisions stay off-chain while loan servicing moves on-chain
Ripple said the protocol separates institutional credit assessment from blockchain settlement. Once a loan has been approved, the XRP Ledger would automate operational tasks including interest calculations, repayment schedules, loan servicing, and default management.
According to Ripple, this structure was intentionally designed to keep underwriting and regulatory requirements under the control of financial institutions while using the blockchain for standardized execution. The company said this approach mirrors how traditional financial markets separate credit decisions from settlement infrastructure.
The proposal introduces two core building blocks. A Single Asset Vault would pool a single token for lending, while a dedicated Lending Protocol would manage loan origination, servicing, and repayment. Ripple said separating custody from lending infrastructure follows the model already used in conventional capital markets.
As one example, Ripple said a payment provider holding reserves of RLUSD could obtain short-term liquidity through the protocol while waiting for cross-border transactions to settle. According to the company, doing so would allow institutions to avoid liquidating reserve assets or relying on higher-cost bank credit facilities.
Institutional access depends on validator approval
Compliance remains a central part of the proposal. Ripple said both lenders and borrowers would need to complete identity verification before participating, with access controlled through permissioned credentials rather than open participation.
The company also proposed assigning first-loss capital at the lending facility level instead of distributing losses equally across all participants. According to Ripple, this structure is intended to create a clearer framework for allocating credit risk.
The lending framework has not yet become part of the XRP Ledger. Ripple said the technical specifications, published as XLS-65 and XLS-66, still require approval from XRPL validators before they can be activated on the main network. Until then, developers and infrastructure providers can begin testing the proposed system on the XRPL devnet.
The proposal arrives days after Ripple drew attention through another institutional finance connection. As previously reported by crypto.news, Elon Musk’s X has begun rolling out X Money to a limited group of Premium+ users using traditional banking infrastructure provided by Cross River Bank, a Ripple banking partner.
Although some members of the XRP community speculated that the relationship could eventually support blockchain-based payments or stablecoin services, neither X nor Cross River Bank has announced plans to integrate XRP or other cryptocurrencies into the payment platform.
For now, X Money operates entirely through conventional banking rails despite Musk previously suggesting crypto features could be added to the platform’s financial services in the future.
