Ripple is actively promoting XRP Ledger (XRPL) as the ideal blockchain for tokenizing real-world assets (RWA) at an institutional scale. Ripple focuses on security, scalability, and interoperability, positioning itself as a trusted platform for decentralized finance (DeFi) and tokenized asset management.
In a recent exclusive interview with BeInCrypto, Ross Edwards, Senior Director of Solutions and Delivery at Ripple, discussed why XRPL is uniquely positioned to bridge traditional finance with DeFi.
Instant Settlements, Stability, and Low Risk: Why XRPL is Right for Financial Institutions
When discussing the role of XRPL in transforming institutional finance, Ross Edwards was unequivocal about its underlying benefits. He pointed out the unique advantages that make blockchain a standout for institutions looking to tokenize RWAs.
For Edwards, the key to XRPL’s success lies in its design. For example, he emphasized that XRPL’s transaction speed—just 3-5 seconds at minimal cost—solves the high costs and latency often associated with traditional financial systems.
“The XRP Ledger provides instant value settlement, as well as transparency and auditability, which can really change the risk profile of transactions,” he explained.
He also clarified that XRPL uses a strong governance mechanism. This allows the community to make adjustments to meet their needs, including the needs of financial institutions.
Moreover, it eliminates the need for individual writing, deployment, and management of smart contracts, as well as the associated audits. These features will ultimately reduce risks, which is critical for financial institutions.
“It was built to create value and assets on the chain, to store them securely, to trade and transfer those assets. So that’s what it was built for. The XRP Ledger is a proven technology. It’s been running for 11-12 years. It’s extremely stable. […] “You just need to call the XRP Ledger API to implement these use cases,” Edwards says.
Additionally, the Automated Market Maker (AMM) is one of Ripple’s major innovations in XRPL. This feature, integrated directly into the protocol, allows institutions to securely engage with DeFi without the need for potentially untrustworthy third-party smart contracts.
What sets XRPL’s AMM apart is its ability to aggregate liquidity across the entire protocol. Ripple’s liquidity strategy is specifically designed to meet the needs of institutional users.
The inclusion of AMM in the XRPL decentralized exchange (DEX) simplifies the process of institutional participation in DeFi. This mechanism provides both security and efficiency for large-scale operations.
The XRPL AMM is also capable of consolidating liquidity across the protocol. This system provides institutions with access to large pools of liquidity and allows them to execute transactions at the most favorable prices. Moreover, it effectively minimizes slippage, a significant problem for institutions executing large transactions, and ensures continuous liquidity for trading purposes.
Additionally, the introduction of the Multi-Purpose Token (MPT) standard will allow institutions to create complex token structures representing different asset classes. The MPT, scheduled to be released in Q3, will provide greater flexibility for institutions looking to tokenize and manage diverse asset portfolios on XRPL.
Ripple is also looking to expand the use of XRPL for institutional DeFi with the upcoming launch of Ripple USD (RLUSD), a fully collateralized stablecoin pegged to the U.S. dollar. Edwards sees the stablecoin as a significant step toward improving liquidity and cross-border transactions for institutions using XRPL.
“If you’re going to be in the real-world tokenization space, stablecoins are a must. They’re going to grow in importance, not just in the crypto world, but in the financial world. And that’s why Ripple believes that Ripple USD is going to add to the stablecoins that already exist. They’re going to be for specific institutions and specific use cases and really help fuel or continue the growth of tokenization in general,” he said.
Leveraging DID and Strategic Partnerships to Grow the Impact of Tokenized Assets
In addition to robust infrastructure and technology, security and compliance are of paramount importance to institutions, especially in tokenized assets. In a previous conversation with BeInCrypto, Ripple’s Markus Infanger, Senior Vice President of RippleX, highlighted how XRPL uses decentralized identifiers (DIDs) to effectively address these issues.
By integrating DID, XRPL enables institutions to securely and verifiably manage user identities, facilitating Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance. This integration helps minimize the risk of fraudulent transactions by streamlining KYC/AML processes. As a result, it enhances both security and compliance for tokenized asset transactions.
“The combination of these features, as well as other features offered to support institutional DeFi on XRPL, such as its own lending protocol and oracles, make it easier to integrate tokenized real assets into the financial infrastructure on the blockchain. Ultimately, DeFi provides new financial rails for activities such as trading, collateralization, investing, and borrowing. Bringing real assets onto the blockchain and exposing them to these rails opens up new possibilities — this is the real value of tokenizing real assets,” Infanger explained.
The growing use of XRPL in institutional finance is highlighted by partnerships with key industry players. For example, Ripple’s partnership with OpenEden led to the introduction of tokenized US Treasury bills (T-bills) on XRPL.
Similarly, Ripple is partnering with Archax, the UK’s first regulated digital asset exchange, broker, and custodian. Archax plans to bring hundreds of millions of dollars in tokenized RWA to the XRPL next year.
Balancing Short-Term Gains and Long-Term Growth in Tokenization
Despite the XRP Ledger’s solid foundation for institutional adoption, it has faced some challenges, particularly in on-chain activity. A recent report found that in Q2 2024, the number of transactions on XRPL fell by more than 65% compared to Q1. This decline is also seen in transaction volumes and overall DEX engagement, where trading volume fell by nearly 43%.
The average transaction value of XRPL has also increased significantly. In Q2, transaction values more than doubled compared to Q1, increasing by 168%, which may have contributed to the decline in activity. Additionally, fewer new wallets were created on the network, with wallet growth falling by 45.8%.
Edwards also noted that the challenges of tokenization extend beyond the XRPL itself. He acknowledged that one of the biggest challenges of tokenization is its long-term nature. According to him, this requires patience and gradual building of the ecosystem.
“Tokenization is not something that can be done overnight. It is not dependent on someone’s decision or ability to take an asset, write a piece of code and store it somewhere, even if it’s a blockchain or something else. It’s actually a very simple process. It’s about building an ecosystem and connecting these value chains,” he said.
Edwards emphasized that financial institutions need immediate, tangible returns. This means that each step in the tokenization process must deliver short-term value while laying the groundwork for long-term growth.
He also noted that this requirement is a delicate balancing act that Ripple and the wider industry must carefully navigate. Additionally, Edwards emphasized that financial institutions must play a key role in achieving this balance, as their participation is critical to the success of the tokenization ecosystem.
In the near term, however, Edwards believes that growing demand and understanding the drivers of tokenization will be important. As the use of tokenized assets grows — moving beyond simple acquisition and storage to broader use cases — the market will begin to expand rapidly.
“We’ll see once that happens and unlocks, once these tokenized assets are used more often than just bought and held, we’ll start to see this space grow significantly. And that’s going to be critical to the future of the financial system,” he concluded.
