Notably, for more than a decade, the XRP Ledger has focused almost entirely on payments, as its original architects deliberately excluded native lending tools and broad smart contract functionality.
While this design helped the XRPL gain traction in payments and cross-border transfers, it also limited growth in decentralized finance. As newer blockchains launched with lending and DeFi features built in, XRPL’s DeFi ecosystem has lagged despite the network’s age and stability.
Now, the demand for compliant and capital-efficient onchain credit has seen a rapid surge, especially among institutions. In response, Ripple and other ecosystem developers have begun exploring protocol-level lending on XRPL.
Ed Hennis, a staff software engineer at Ripple, recently called attention to a proposed XRPL Lending Protocol. Hennis explained that the planned upgrade would introduce fixed-term, fixed-rate, underwritten lending directly into the XRP Ledger itself.
Also, rather than relying on external smart contracts, the protocol would handle borrowing rules, repayment schedules, interest calculations, and permissions at the core ledger level. This would allow enterprises to access onchain credit with the same predictability and discipline they expect from traditional institutional lending.
With this change, XRPL would move beyond its payments-only identity and develop into a broader institutional finance platform.
Notably, the lending structure would support more efficient use of capital, stronger risk controls, and new productive roles for both XRP and Ripple’s stablecoin, RLUSD. Large XRP holders, exchanges, and custodians could lend XRP into isolated credit facilities and create a scalable yield market tied to XRP’s over $115 billion value.
Hennis also highlighted practical use cases. Specifically, payment service providers could borrow RLUSD for short periods to bridge slow bank and card settlement cycles, enabling instant merchant payouts while lowering idle capital requirements.
In addition, market makers could borrow XRP or RLUSD to finance inventory, support arbitrage strategies, and provide liquidity across venues without straining their balance sheets.
Also, fintech lenders could access on-ledger credit to fund invoice financing, seasonal demand, and short-term working capital for small and medium-sized businesses.
Per the report, the proposal directly addresses weaknesses in today’s crypto lending market. For instance, most DeFi lending platforms depend on heavy overcollateralization, demanding far more collateral than real businesses can afford.
Interest rates also fluctuate sharply because retail supply and demand drive them, not borrower quality or credit fundamentals. On top of that, institutions face significant risk from custom smart contracts, complex integrations, and limited auditability.
XRPL’s approach seeks to remove these barriers by embedding lending directly into the protocol through the proposed XLS-66d amendment. The design relies on Single Asset Vaults, with each vault holding only one asset, such as XRP or RLUSD.
This will keep liquidity clean and prevent risk from spreading across assets. Moreover, pool administrators would manage underwriting, servicing, fees, and repayments, closely mirroring how traditional loan managers operate in real-world credit markets.
Importantly, the model also employs risk controls. Notably, experienced underwriters would evaluate borrowers off-chain using established financial data and compliance checks. Further, pool administrators or underwriters would provide first-loss capital to absorb potential defaults.
Moreover, each loan could exist in its own isolated vault, ensuring that one borrower’s failure never affects others. Also, every transaction and repayment would remain permanently recorded onchain, delivering full transparency and auditability.
Hennis stressed that this supports a wide range of institutional users, including market makers, payment firms, trading desks, and fintech lenders. Meanwhile, when more assets gain support, the lending system could expand well beyond XRP and RLUSD.
Looking ahead, Ripple expects the relevant lending amendments to enter validator voting in late January. Reacting to the disclosure, Brad Kimes from Digital Perspectives urged investors not to sell their XRP, echoing previous calls from other market commentators, who insist that borrowing against one’s holdings is a better option.
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