Ripple wants to add a lending layer to its XRP Ledger blockchain, CoinDesk reported Monday (June 29).
The move is a bid by the blockchain company to allow institutions to borrow against on-chain assets instead of simply issuing and moving them, according to the report.
The planned XRPL Lending Protocol is built on a “simple split,” the report said. The blockchain deals with the mechanics of a loan, while the actual credit decision still lies with the lender, off the blockchain.
Ripple is arguing that while a blockchain can consistently enforce rules, it can’t determine creditworthiness or navigate various jurisdictional rules, meaning that those jobs should remain with the people who already do them, according to the report.
Among the uses Ripple mentioned was short-term financing, the report said. A payment company holding reserves in Ripple’s RLUSD stablecoin might need cash to cover outgoing payments before a cross-border settlement clears. Rather than drawing on a bank credit line or selling assets, the payment company could borrow against the incoming settlement via an approved pool, with repayment automatically enforced.
Ripple is facing a crowded playing field, with online lending protocols holding billions of dollars in deposits, according to the report.
However, Ripple said those systems were built around cryptocurrency-native governance. A protocol can change its risk rules through community votes, which institutions can’t underwrite in advance, per the report.
Meanwhile, banks see stablecoins as a new type of private money that does not have the stabilizing infrastructure built around banking over the last century.
“Stablecoin advocates counter that many of those protections emerged only after innovation occurred, and that competition from blockchain-based payments could ultimately produce a more efficient financial system,” PYMNTS reported this month. “In many respects, the cryptocurrency industry has already won the first phase of the argument. The GENIUS Act regulating stablecoins was signed into law last summer and is in its rulemaking period.”
However, the federal rulemaking process is raising some of the traditional financial sector’s deepest-held concerns around digital assets, as banking interest groups and federal banking agencies work together to implement the GENIUS Act.