Ripple Introduces Crypto Lending to XRP Ledger at Protocol Layer

Key Insights

• Ripple is proposing the introduction of the XRPL Lending Protocol on the XRPL network.
• The protocol will be an onchain credit infrastructure operating at the protocol layer and focused on institutions.
• The XRPL Foundation is already partnering with crypto projects to build a compliant lending platform

Ripple is introducing a new lending protocol on the XRP Ledger that will enable lending against tokenized assets. The firm announced the proposed XRPL Lending Protocol today, noting that it will bring credit infrastructure to the network.

According to Ripple, tokenizing assets on-chain is only half the job; the other half is borrowing against them. It stated that these two parts must exist in a real financial market, and that is why it wants to create a lending and credit layer on XRPL.

How Will XRPL Lending Protocol Work?

Ripple wants the XRPL Lending Protocol to serve as the network’s single credit infrastructure. It noted that this is better than the existing system of fragmented onchain lending applications.

In its proposal, the credit layer will be on the blockchain because blockchains are well-suited to enforcing rules consistently. However, institutions will still determine creditworthiness and decide whether to grant credit and on what terms.

According to Ripple,  “blockchain should not replace credit teams, legal documentation, or institution-specific compliance frameworks. Those belong off-chain, where the judgment required to do them well can actually be applied.”

To implement this, the XRPL Lending Protocol is split into two parts: the Single Asset Vault and the Lending Protocol. Single Asset Vault pools and manages a single asset, while the Lending Protocol administers the pooled asset as loans under set terms.

Its initial proposed use for the lending protocol is short-term credit. The firm describes a situation where payment providers holding RLUSD reserves can access liquidity to fund outgoing payments pending settlement of a cross-border transaction.

This allows them to borrow against their expected inflow onchain instead of selling assets or drawing a line of credit from the bank. The launch of the lending protocol depends on validators’ approval of the two components, technically described as XLS-65 and XLS-66 under the proposal.

Ripple Says XRPL Lending Protocol is Designed for Institutions

Meanwhile, Ripple stated that the XRPL Lending Protocol is designed for institutions, allowing them to tap into the onchain credit system while still maintaining control.

It noted that while lending protocols such as Aave, Clearpool, Maple, and Compound already exist, most are designed on crypto-native governance and risk frameworks.

Although private permissioned protocols already address this issue, Ripple argued that they are usually exclusive. This translates into limited counterparties, distribution, and liquidity.

XRPL credit infrastructure addresses all these, being standardized at the protocol layer while remaining public. “The network remains public, allowing institutions to access broader liquidity and distribution while supporting permissioned participation through credentials when required,” it said.

Interestingly, Ripple’s move coincides with the XRPL Foundation’s decision to partner with the XRPL-based tokenization and yield platform VS1.  The foundation disclosed today that VS1 will build an open-source reference app for permissioned, compliant lending on the network.

The news of recent developments appears to have had a positive impact on XRP’s performance, with it rising 2% today. It is currently trading near $1, down 21% over the past month amid broader market turmoil.

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