Ripple is adding a lending layer to the XRP Ledger, allowing institutions to borrow against tokenized assets they hold onchain, rather than just issuing and transferring them. The proposed XRPL Lending Protocol, detailed in technical drafts XLS-65 and XLS-66, remains a proposal for now, but developers started testing on a testnet this week.
On-Chain Execution, Off-Chain Credit Judgment
The protocol separates the mechanics of a loan from the credit decision. The blockchain handles pooling, interest accrual, repayment enforcement, and default processing once a loan is agreed. The creditworthiness check and terms — who qualifies, at what rate — stay with the lending institution off the blockchain. Ripple argues that blockchains are good at enforcing rules consistently but cannot assess credit risk or navigate jurisdiction-specific regulations, so that judgment should remain with traditional lenders.
Two components define the proposal. A Single Asset Vault pools a single type of tokenized asset, and the lending layer converts that pooled money into loans with fixed terms. Both are still subject to approval by XRPL validators. Infrastructure providers and developers began integrating and testing on a testnet from Monday.
Use Case: Bridging Settlement Gaps
Ripple leads with short-term financing. A payment company holding RLUSD (Ripple's dollar-pegged stablecoin) reserves might need cash to fund an outgoing payment while waiting for a cross-border settlement that clears two days later. Instead of tapping a bank credit line or selling assets, it could borrow against the incoming settlement through an approved pool, with repayment enforced automatically.
The system is separate from XRP and from RLUSD — RLUSD is just one asset that could be used as collateral. It is infrastructure for institutions, not a retail product.
Competition and Differentiation
Onchain lending is already a crowded field: Aave, Compound, Maple, and Clearpool collectively hold billions in deposits. Ripple points out that those protocols rely on crypto-native governance, where risk rules can change via community votes — something institutions cannot pre-underwrite.
Ripple's counter is to lock lending mechanics at the base layer so the behavior does not shift mid-loan, while keeping the network public rather than permissioned. That gives lenders deterministic rules without sacrificing openness.
The XLS-65 and XLS-66 proposals will go to XRPL validators for a vote in the coming weeks. If approved, they will be deployed to mainnet.