XRP holders can now borrow Ripple's RLUSD stablecoin on Ethereum without selling their coins, thanks to a new isolated market on Morpho Blue. According to reports from CoinDesk, the lending pool is managed by Sentora and represents a $280 million vault that had never accepted an XRP-linked asset before. Borrowers can use wrapped XRP (FXRP) as collateral to take out RLUSD at their chosen loan-to-value ratio, with access available through a permissionless system requiring no whitelist. This integration represents the first time an XRP version has been accepted as collateral in an institutional lending vault on Ethereum mainnet. The practical upshot allows XRP holders to mint FXRP through Flare's FAssets protocol, bridge it to Ethereum via Stargate, and borrow RLUSD without ever having to sell their underlying XRP.
The approval came after Sentora reviewed FXRP's market behavior, oracle design, liquidity and liquidation capacity under its institutional risk framework. As reported by CoinDesk, the asset will face the same ongoing monitoring as other collateral in the vault. The isolated structure ensures that each Morpho Blue market carries its own collateral asset, debt asset, oracle and liquidation threshold, preventing failures from spreading to the rest of the vault. Borrowers pay interest based on utilization and must keep sufficient collateral to avoid liquidation. The vault currently holds roughly $280 million in deposits, making it the largest institutionally curated vault of its kind on Ethereum. Sentora's CTO Jesus Rodriguez described the approval as a deliberate expansion of on-chain credit, noting that XRP remains surprisingly underused in on-chain credit despite being one of crypto's largest and most liquid assets.
The current borrowing process involves four steps: users mint FXRP through Flare's FAssets system, bridge it to Ethereum via Stargate, deposit it into the market and borrow at their chosen loan-to-value ratio. According to Flare co-founder and CEO Hugo Philion, the company is building a route through Smart Accounts that would let holders authorize the entire sequence from an XRP Ledger wallet. Flare is also developing direct XRPL-to-Ethereum minting capabilities. The isolated market structure on Morpho Blue limits contagion risk if something goes sideways with FXRP pricing or liquidity, while access remains non-custodial and permissionless with no KYC gate or minimum deposit threshold.
Despite the new opportunity, adoption faces significant challenges. As reported by CoinDesk, roughly 155 million FXRP has been minted since launch against Philion's stated target of drawing 5 billion XRP into Flare's ecosystem over six months. The new market opens with what Flare describes as a 'conservative supply cap' that may rise as usage grows. Philion noted that XRP is one of the largest assets in crypto but one of the least used in DeFi, making the institutional risk team underwriting on Ethereum mainnet particularly significant. The bridging step from XRPL to Flare to Ethereum introduces multiple layers of smart contract risk, though the isolated market structure mitigates some concerns. CoinDesk reports that if deposits remain below $50 million after six months, the integration would be considered a technical success but a commercial failure.
Recent on-chain data shows signs of recovery in XRPL's stablecoin ecosystem following Ripple's strategic moves. As reported by AMBCrypto, XRPL's stablecoin market cap recently fell by more than 14% in just 24 hours, with RLUSD accounting for nearly 100% of the entire decline. However, Ripple recently minted nearly 63 million RLUSD, helping push XRPL's stablecoin market cap back above $950 million, representing an 11% recovery that suggests liquidity is starting to return. The timing of this rebound coincides with Ripple's back-to-back strategic partnerships since August, suggesting the company is actively working to grow liquidity across XRPL through expanded DeFi integration and tokenization support.
XRP's absence from DeFi reflects three structural factors that have kept the asset isolated from the composable lending ecosystem. The $70 billion asset has been almost entirely absent from on-chain credit markets due to its separate blockchain architecture, regulatory uncertainty from the SEC lawsuit against Ripple, and limited DeFi ecosystem on XRPL. However, the FXRP/RLUSD lending integration opens significant potential for adoption. If even 5% of XRP's market capitalization migrates into DeFi collateral positions, it would result in $3.5 billion in new collateral available for borrowing. At 10% adoption, it would be $7 billion. For context, Morpho Blue's total value locked across all markets is roughly $4 billion, making a meaningful flow of XRP into the protocol potentially one of the largest collateral assets on the platform. The upcoming XRPL 3.3.0 upgrade will also bring ZK-powered privacy for tokenized assets with focus on institutional users, further expanding XRP's on-chain utility.
