Ripple Pushes XRPL For DeFi Use Though Liquidity Remains Underdeveloped

TLDR

Table of Contents

Ripple proposes an institutional DeFi framework centered on compliance and tokenized assets on XRPL.
XRPL processes over 1.8 million daily transactions but lacks sufficient liquidity for large-scale DeFi use.
Ripple’s RLUSD stablecoin makes up 83% of XRPL’s $418M stablecoin market.
A credit protocol based on XRP is planned for 2026, pending approval and deployment.

Ripple is aiming to transform decentralized finance by integrating compliance tools into the XRP Ledger (XRPL), which it believes will help regulated institutions adopt DeFi. However, current liquidity on XRPL remains low, raising doubts about whether these efforts will deliver real traction.

Ripple Proposes Institutional DeFi Stack on XRPL

Ripple has outlined its vision for a compliant decentralized finance ecosystem, positioning XRP at its core. According to the February blueprint, Ripple aims to transition DeFi from open liquidity pools to a regulated framework using features like tokenized collateral, permissioned exchanges, and identity tools.

Ripple’s proposed institutional DeFi stack includes stablecoin settlement, on-chain identity credentials, and a forthcoming lending protocol. These features are designed to mirror the structure of traditional finance, with identity verification, risk controls, and controlled access to trading and liquidity.

Ripple stated that XRPL’s architecture already supports many of these tools, such as Multi-Purpose Tokens and the identity layer known as Credentials. The roadmap includes more additions, such as confidential transfers using zero-knowledge proofs and a lending protocol based on XLS-65 and XLS-66 standards.

XRPL Activity Is Growing but Liquidity Remains Thin

Despite the new institutional pitch, XRPL still faces liquidity limitations. Messari reported that the ledger processed 1.83 million daily transactions in Q4 2025, a 3.1% increase from the previous quarter. However, daily active addresses dropped to around 49,000.

Payment transactions accounted for just under half of activity, while the creation of offers rose to 42% of transaction volume. While the platform is active, this data does not confirm institutional engagement or deep liquidity.

DefiLlama data showed XRPL holds about $418 million in stablecoins, with RLUSD contributing approximately $348 million. The XRPL decentralized exchange had just $38.21 million in total value locked and $15.08 million in daily volume, which remains small compared to leading DeFi protocols.

XRP Use Case Focused on Liquidity Routing, Not Fee Burn

Ripple emphasized that XRP’s value lies in its role in liquidity routing rather than fee burning. XRPL uses XRP as the intermediary asset in auto-bridging trades when it improves execution. This feature could make XRP useful as inventory for market makers, especially in regulated FX or stablecoin trading pairs.

The base transaction cost on XRPL is small, and although about 14.3 million XRP has been burned since inception, Messari estimated the total transaction fee burn in Q4 2025 at just $133,100. These low numbers suggest that XRP’s market role will need to grow beyond protocol-level mechanics.

The ledger also includes reserve requirements, with 1 XRP per account and 0.2 XRP for specific objects like trust lines, but these do not drive large-scale demand. Instead, Ripple is focusing on XRP’s role in routing trades between permissioned assets.

Stablecoin and Credit Strategy to Be Tested in 2026

Ripple is counting on its RLUSD stablecoin and a planned lending protocol to drive institutional engagement. Standard Chartered estimated the stablecoin market could reach $2 trillion by 2028, while JPMorgan gave a lower projection of $500 billion.

Ripple’s RLUSD already dominates the XRPL stablecoin ecosystem. The upcoming lending protocol is expected to support fixed-term, fixed-rate loans and is intended to be used by Ripple-backed firm Evernorth. However, it remains in proposal form and may not be deployed until later in 2026.

Ripple’s compliance-led approach will be tested by whether trading volume increases, whether XRP gains routing share in token transfers, and whether institutions adopt XRPL as infrastructure. So far, the tools are taking shape, but liquidity still needs to catch up.