TL;DR:
- Ripple proposed the XRPL Lending Protocol, a system that would allow institutions to borrow against tokenized assets on-chain.
- The protocol divides functions: the blockchain executes the loan conditions, while credit decisions remain off-chain.
- Technical proposals XLS-65 and XLS-66 still require approval from the network’s validators before taking effect.
Ripple submitted a proposal to add a lending layer to the XRP Ledger, the blockchain behind XRP, with the goal of enabling financial institutions to take out credit against assets they already hold on-chain, rather than being limited to issuing or transferring them.
Ripple’s protocol is structured around a clear division of responsibilities. The blockchain handles the execution of agreed-upon conditions: interest accrual, payment enforcement and default processing. Credit decisions, such as borrower solvency or jurisdiction-specific terms, remain in the hands of lending institutions off-chain. The argument behind its design is that a blockchain can apply rules consistently, but cannot assess credit risk or adapt to regulatory frameworks that vary by country.
A Protocol for Institutions
The protocol has two technical components. The first is a Single Asset Vault, which pools a single asset. The second is the lending layer itself, which converts that capital into credit with defined terms. Both are formalized in technical drafts XLS-65 and XLS-66, which are available for testing on a development network but still subject to approval from the validators that operate the network.
The primary use case Ripple highlights is short-term financing. A payments company that holds reserves in RLUSD, the company’s dollar-pegged stablecoin, might need liquidity to cover outgoing payments before a cross-border settlement is completed. Instead of tapping a bank credit line or selling assets, it could take out a loan against that pending settlement through an approved pool, where repayment is managed automatically.
Ripple Challenges a Market with Strong Players
The segment already includes protocols such as Aave, Compound, Maple and Clearpool, which together manage billions in deposits. Ripple acknowledges the landscape and argues that those systems were designed with crypto-native governance, where rules can be changed by community vote, something institutions cannot commit to in advance.
The company’s response is to fix the lending mechanics at the base layer of the network so that behavior does not shift beneath the lender’s feet, while keeping the network public rather than restricting it to a closed group as some permissioned systems do.
