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XRP Ripple explores new ways to connect XRP to institutional finance
As Ripple tests credit solutions for its paying customers, the company is exploring a new way to combine XRP with institutional finance. Monica Long, president of Ripple, said the company is committed to using the XRP lent as collateral to support customers 'short-term payment flows through the XRP Ledger lending infrastructure.
XRPs or support short-term credit lines
In the proposed model, XRPs deposited in loan pools can serve as collateral for credit facilities used by payment providers and institutional participants. Eligible users do not need to sell XRPs to gain liquidity, but can borrow with the XRPs they hold in the lending infrastructure.
The lending structure of the XRP ledger includes Single Asset Vaults and pooled liquidity that comply with XLS-65 and XLS-66 specifications. These features are designed to support lending activities directly on the books, while allowing institutions to retain their existing credit and risk management processes.
The underwriting work of institutions will still be carried out offline. Financial institutions can conduct credit checks, evaluate counterparties and determine loan terms before approving credit facilities. Once established, the execution of the loan, the repayment process and the execution of the terms of the agreement can be operated through the XRP ledger.
Currently, Ripple is conducting a credit-related pilot project with the goal of activating relevant functions in 2027.
Lending is expected to expand XRP's role in payments
The proposed borrowing model will introduce a new use for XRP that is different from its role in existing payment flows. Payment transactions involve XRP being transferred between parties and converted during the settlement process. However, XRP, which serves as collateral for loans, may be held in vaults for the medium to long term to support credit facilities.
This difference could increase the amount of XRPs invested in lending infrastructure if institutions and payment providers adopt the model on a large scale. It will also link payment activity to liquidity that stays on the chain for longer periods of time.
For payment providers, this model can address working capital requirements caused by settlement delays and prepayment requirements. Money transfer companies and financial technology companies may be able to obtain short-term liquidity backed by qualified XRP collateral, rather than relying entirely on traditional credit arrangements.
Long's comments therefore place XRP ledger lending in Ripple's broader payment efforts. The pilot project will determine whether the institution considers the structure practical and whether the lending infrastructure can support large-scale payment-related credit.
