Ripple Proposes Lending Protocol for XRP Ledger Institutional Use

The proposal, currently under review as technical specifications XLS-65 and XLS-66, seeks to modernize institutional finance by separating credit risk from blockchain execution. Rather than embedding complex underwriting into the ledger, the system mandates that institutions handle compliance and loan negotiations off-chain. Once terms are finalized, the XRP Ledger automates loan servicing, interest calculations, and repayment schedules.

By utilizing two primary components—the Single Asset Vault for token pooling and the dedicated Lending Protocol for management—Ripple aims to replicate the operational efficiency of conventional capital markets. For instance, payment providers holding reserves of RLUSD could access short-term liquidity without triggering tax events or asset sales. To maintain strict regulatory adherence, the framework requires participants to complete identity verification and utilizes permissioned credentials, rather than open-market access. The system also introduces a first-loss capital structure to clarify risk allocation among lenders. The protocol is currently available for testing on the XRPL devnet and awaits formal approval from network validators before potential mainnet integration.