Ripple intends to introduce an institutional-grade lending protocol on XRPL, allowing financing using tokenized assets as collateral

Odaily Planet Daily reports that Ripple is pushing to add a layer of lending infrastructure on the XRP Ledger (XRPL), enabling institutions to secure financing using on-chain tokenized assets as collateral. Loan terms will be automatically executed by the protocol, while credit assessment and lending decisions remain handled by off-chain institutions.

According to disclosures, the proposal is named the XRPL Lending Protocol (corresponding to the XLS-65 and XLS-66 standards). It is currently in the technical draft stage and requires approval from validators via a vote before it can be launched on the mainnet. However, it has already been opened for developer testing on the test network.

The protocol's design splits the lending process into two parts: on-chain management of liquidity pools, interest calculations, repayment execution, and default handling mechanisms; while borrower credit assessment and loan term settings remain in the hands of traditional financial institutions to comply with regulatory requirements in different jurisdictions.

Ripple states that this mechanism is primarily targeted at institutional short-term liquidity needs, such as in cross-border payment scenarios, where temporary financing is obtained through stablecoins or collateralized assets before settlement is completed, thereby improving capital efficiency.

Analysts believe that this solution attempts to introduce a "rule-based lending infrastructure" similar to traditional finance while maintaining the open network properties of the XRPL. However, it will still face competition from established on-chain lending protocols such as Aave, Compound, and Maple. (CoinDesk)