Ripple Pushes XRP As Settlement Layer But Liquidity Remains a Key Hurdle

TLDR

• Ripple proposes XRP as a compliant settlement asset in the institutional DeFi space.
• XRPL shows about $418M in stablecoins but lacks deep liquidity for major adoption.
• XRP’s use as an intermediary via auto-bridging is conditional on execution cost.
• Core XRPL tools like Multi-Purpose Tokens and Credentials are already live.

Ripple is advancing its strategy to position XRP as a key asset for institutional settlement, moving beyond speculative use. While the XRP Ledger introduces compliance-focused features to attract regulated financial firms, Ripple acknowledges that liquidity on the network remains limited and institutional adoption is still uncertain.

Ripple’s Institutional Strategy and XRP’s Role in Settlement

Ripple is expanding its use of the XRP Ledger (XRPL) to serve institutional markets. The company says that compliance-focused decentralized finance (DeFi) is essential for financial institutions to use blockchain tools. Instead of targeting total value locked, Ripple focuses on identity control, access management, tokenized assets, and settlement tools.

To support this shift, Ripple has launched features including Multi-Purpose Tokens and identity verification tools called Credentials. These tools are already available on XRPL. Ripple has also scheduled updates such as a permissioned decentralized exchange and a lending protocol built on XLS-66 for release this year.

Ripple’s latest strategy repositions XRP not only as a transaction fee token but as a utility asset used for liquidity routing, custody reserves, and on-ledger borrowing. However, the company admits that liquidity on XRPL is still too thin to prove the success of this approach.

XRPL Metrics Show Activity but Not Institutional Scale

While transaction activity has increased on XRPL, current volumes do not confirm wide institutional adoption. According to data from Messari, XRPL processed 1.83 million daily transactions in Q4 2025, although only around 909,000 were direct payment transactions.

Meanwhile, average daily active addresses dropped to about 49,000. Offer creation now represents 42% of all activity, showing increased exchange use. However, these figures reflect retail or developer activity rather than large-scale financial institutions.

DefiLlama reports stablecoins worth $418 million are currently on XRPL. The network’s decentralized exchange holds only $38.21 million in value locked. This level of liquidity may not yet support consistent institutional usage.

XRP’s Potential as a Liquidity Bridge Remains Unconfirmed

Ripple emphasizes XRP’s role as an intermediary asset in liquidity flows. XRPL includes an auto-bridging feature, which allows XRP to connect token pairs when it reduces costs. However, this feature only activates when conditions are favorable, such as price or depth advantages.

The success of XRP in this role depends on whether institutions choose to hold it for routing value. Ripple says that regulated institutions could use XRP as intermediate inventory in stablecoin and foreign exchange transactions. Still, direct stablecoin-to-stablecoin pairs could outcompete XRP if they offer better execution.

Ripple’s thesis is that XRP can act as settlement infrastructure. It supports account reserves and fee payments, but its broader role depends on deep, consistent liquidity and the development of tokenized financial products on XRPL.

Stablecoin Growth and Credit Protocols Key to Ripple’s Plan

Ripple is also betting on stablecoins and credit tools to attract institutional finance. Its stablecoin RLUSD holds a $1.49 billion market cap, with around $348 million circulating on XRPL. While RLUSD dominates XRPL stablecoin use, the total remains small compared to major blockchains.

A new credit layer is also in development, with a lending protocol planned for release later this year. Ripple-backed firm Evernorth has expressed interest in the XLS-66 protocol, intended to support fixed-term and fixed-rate loans.

However, institutional lenders will demand clear performance standards, risk management, and default controls. Without these elements, the protocol may not reach broad adoption. Ripple will need to show that institutions can use XRPL securely for tokenized loans and asset-backed finance.

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