The upcoming XRPL Lending Protocol brings fixed-term, fixed-rate, underwritten credit directly into the XRP Ledger at the protocol level. For the first time, enterprises gain access to predictable, onchain lending designed for institutional use.
With this upgrade, XRPL evolves from a payments-first ledger into a broader institutional finance platform, supporting capital-efficient credit flows, safer risk management, and new productive roles for XRP and RLUSD.
It also unlocks a critical new use case for XRP holders: institutional-grade yield. Custodians, exchanges, and large XRP holders can lend XRP into isolated, underwritten credit facilities to create the first scalable yield venue for XRP’s $115B+ market cap.
Beyond this:
Payment Service Providers (PSPs) can instantly pre-fund merchant payouts in RLUSD. They borrow RLUSD for 1–3 days to bridge slow card-network and banking settlement windows, reducing capital requirements and enabling instant payouts globally.
Market makers can borrow XRP/RLUSD for inventory financing at scale. This lets firms run delta-neutral strategies, arbitrage, and cross-venue liquidity provisioning without locking up their own balance sheet.
Fintech lenders can access on-ledger working capital for SME and invoice financing. Underwritten institutional credit (via select partners) allows fintechs to fund short-term loans, seasonal volumes, or treasury gaps with transparent, automated repayment rails.
In short, this is the first time that protocol-native credit markets have become possible on a global chain.
And it positions the XRPL as a settlement and credit infrastructure for real institutions.
Existing Issues
Crypto lending has grown meaningfully, with the combined lending markets reaching $90B in total-value-locked at their peak.
Blue-chip DeFi lending protocols have made excellent traction with the crypto-native market, while the broader financial system has been effectively locked out for a few key reasons:
1. Capital Inefficiency in Existing Crypto Lending Models
Most DeFi lending protocols rely on overcollateralization, often requiring 120–150% collateral to manage volatility and pseudonymous risk. This model works well for crypto-native markets, but it is capital-inefficient for real businesses, which typically operate with underwritten, unsecured, or partially secured credit facilities.
Introducing an undercollateralized, institutionally underwritten model on the XRPL complements existing overcollateralized approaches by enabling enterprises to access credit in a form that aligns with how traditional financing is structured in practice.
2. Variable rates & speculation
Rates swing wildly because they’re set by retail supply/demand dynamics, not by underwriting, borrower quality, or fundamentals.
As a result, crypto lending resembles speculative funding markets where credit terms, risk pricing, and liquidity conditions can change overnight. This makes adoption very challenging for any institution that needs predictable financing.
3. Smart contract risk
Each DeFi lending protocol:
- Has its own smart contract risk
- Requires bespoke integration
- Provides no real auditability for institutions
However, blockchain technology offers significant advantages over the traditional system, including 24/7 settlement, instant finality, transparent audit trails, and programmable repayment logic.
This means that solving existing challenges, such as overcollateralization and others, can unlock cheaper credit, reduce operational risk, and enable lending models that are impossible to run on legacy infrastructure.
The Building Blocks: Single Asset Vaults & The Lending Protocol
Most blockchain-based lending systems rely on smart contracts deployed on top of a chain. While flexible, this architecture creates institutional friction: every smart contract introduces its own risk surface, audit requirements, and operational variability. For enterprises evaluating credit markets, this lack of standardisation and predictable behaviour makes participation difficult.
XRPL’s new lending system addresses this by introducing a protocol-native credit primitive through the XLS-66d amendment. Instead of running a separate application layer with bespoke contracts, the core rules of borrowing, repayment, term structure, interest, and authorisation are embedded directly into the protocol itself. This dramatically reduces risk, ensures consistent behaviour, and provides institutions with the reliability they need.
A water pump is a great analogy:
- The Lending Protocol (LP) is the pump: it defines how water flows, how pressure is controlled, and when valves open or close.
- The SAV is the water tank: it holds only one type of water (e.g. XRP) in a contained reservoir.
- The pool admin is the operator pumping the water: they decide when to open the pipes, who can draw water, and under what terms.
Together, the LP + SAV + Pool Admin form a complete institutional lending system, but with the mechanical reliability of infrastructure built directly into the ledger itself.
The protocol utilizes Single Asset Vaults (SAVs) to house liquidity, where each SAV is dedicated to a specific asset. For example, there will be SAVs for XRP, others for RLUSD, and others for future assets. This isolation ensures that each asset has clean, segregated liquidity and that risk never flows from one vault to another.
Pool admins act as real-world loan managers: they oversee borrower underwriting, manage repayments, track servicing, and set facility fees. In practice, a single SAV could be established for a specific asset, and the pool admin would manage the entire lifecycle of loans that draw from that vault — from risk assessment to settlement.
Source: https://x.com/RippleXDev/status/1785751045408260600
The XLS-66d amendment lays the foundation for this architecture, enabling simplicity, direct lending, and a modular design that mirrors institutional credit markets. By embedding these mechanics at the protocol level, XRPL provides a unified, secure, and scalable credit primitive capable of supporting real-world financial institutions at a global scale.
How Risk Is Managed
Building the infrastructure of a new global financial system introduces significant risks.
The design of the Lending Protocol ensures that several precautions are taken, both at the feature level and in the required participants who will facilitate a credit marketplace.
These include:
1. Off-chain underwriting: Experienced underwriters evaluate creditworthiness using real credit data, financial statements, and compliance checks.
This mirrors traditional credit workflows and ensures borrowers are vetted long before any onchain loan is issued.
2. First-loss capital: Underwriters or pool admins supply first-loss capital to absorb defaults.
Underwriters or pool admins supply a first-loss tranche that absorbs defaults before lenders ever take risk. In practice, this functions similarly to a junior tranche in traditional credit structures: the first-loss capital takes any impairment before senior liquidity providers are affected. This alignment ensures that the pool admin has meaningful skin-in-the-game and protects lenders from initial losses.
3. Isolated risk per borrower: Each loan can be placed in its own SAV, and one default cannot impact others.
If a Single Asset Vault (SAV) is permissioned for a single borrower, then any default is contained entirely within that borrower’s vault, even if they have multiple active loans. If a vault is shared by several borrowers or lenders, a default impacts participants proportionally. In practice, the most conservative structure is one borrower–one lender per SAV, providing the strongest risk isolation.
4. Transparent, immutable records: All events live onchain, providing full transparency.
All loan events, such as issuance and repayments, are recorded onchain. This provides real-time auditability, simplifies accounting, strengthens compliance reporting, and enables institutions to track credit performance with complete clarity.
Case Study: Borrowing XRP & RLUSD
There are many ways in which different financial institutions can leverage the XRPL Lending Protocol, depending on their liquidity needs, business model, and credit operations. For instance, market makers can borrow XRP or RLUSD to run capital-efficient liquidity strategies, while PSPs and fintechs can borrow RLUSD to pre-fund merchant payouts and eliminate settlement delays.
Below, we outline practical examples for XRP and RLUSD—while keeping in mind that because any supported asset can have its own Single Asset Vault (SAV), these use cases only scratch the surface of what becomes possible as the ecosystem expands.
1. Market Makers
Market makers require capital to maintain balanced inventory across multiple exchanges, deepen order books, and respond to price dislocations.
Borrowing XRP or RLUSD allows them to operate more efficiently without tying up significant proprietary capital. This improves liquidity across the crypto ecosystem and positions XRP/RLUSD as a productive asset within global market-making flows.
Common uses include:
- Inventory financing: Borrow assets to deepen capital inventory on various trading venues.
- Cross-exchange arbitrage: Use borrowed XRP or RLUSD to capture price gaps across exchanges without deploying locked collateral.
- Delta-neutral strategies: Borrow, hedge, and earn funding or spread without taking directional price risk.
- Liquidity provisioning: Supply borrowed assets to AMM pools or order books, earning fees while staying capital-light.
These strategies all revolve around borrowing an asset at a predictable fixed rate and deploying it into liquidity, arbitrage, or hedged positions that generate a higher return.
2. Payment Service Providers (PSPs) & Fintech Payment Rails
PSPs routinely face timing mismatches between when merchants must be paid and when banks/card networks settle funds.
Borrowing RLUSD eliminates settlement lag by providing PSPs with instant, predictable liquidity. This enables “instant payout” experiences while reducing the amount of capital they must keep idle.
Some exciting applications include:
- Settlement float replacement: Borrow RLUSD for 1–3 days to pre-fund payouts while waiting for bank/card settlement.
- Instant merchant payouts: Use borrowed liquidity to deliver real-time payouts, then repay once traditional rails clear.
- Payout liquidity smoothing: Maintain consistent RLUSD liquidity during peak transaction cycles.
- Cross-border corridor funding: Borrow RLUSD or XRP to pre-fund specific currency routes and eliminate foreign exchange delays.
3. Trading Firms
Professional traders and quant firms rely on flexible leverage to deploy capital into structured trades.
Borrowing XRP or RLUSD allows them to run hedged, market-neutral plays without locking up their own assets, which is particularly valuable during periods of high funding spreads or basis dislocations.
A few ways this would play out include:
- Funding-rate arbitrage: Borrow assets to exploit positive funding spreads between spot and perpetual futures.
- Cash-and-carry trades: Borrow the base asset for long-spot/short-futures strategies that lock in a predictable yield.
- Hedged inventory management: Rebalance positions across venues while staying neutral to market drift.
4. Fintech Lenders & SME Financing Partners
Fintech lenders serving SMEs operate on tight liquidity cycles, where predictable short-term credit is essential.
Borrowing RLUSD gives them the capital needed to issue loans, finance invoices, or smooth seasonal working-capital needs. Because the lending protocol supports fixed terms and fixed rates, these firms gain clear repayment timelines (mirroring institutional credit facilities).
Examples include:
- Invoice financing: Borrow RLUSD to advance cash to businesses against outstanding invoices.
- 30–90 day working capital: Provide short-term liquidity to SMEs with predictable on-ledger repayment.
- Seasonal financing: Support SME cash flow during peak seasons such as holidays, tourism waves, or inventory cycles.
What’s Next?
The introduction of protocol-native lending marks a major evolution for the XRPL.
For the first time, real institutions can access fixed-term, underwritten credit directly on-ledger, without smart-contract risk, fragmented liquidity, or overcollateralized constraints.
As SAVs, underwriters, and early pool admins come online, we will see XRP, RLUSD, and future assets take on new roles as productive capital within global payments, market-making, and financing workflows. This unlocks entirely new credit markets, deepens utility for XRP/RLUSD, and positions the XRPL as a foundational settlement and credit infrastructure for institutional finance.
We anticipate the relevant Lending Protocol amendments to enter the validator voting process in late January, marking the next major milestone toward mainnet activation.
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