XRP DeFi: Institutional Interest Signals Growth

What to Know:

• Evernorth, a major XRP treasury company, is backing the XLS-66 proposal to unlock native yield on idle XRP.
• XLS-66 introduces on-ledger lending, potentially improving capital efficiency and expanding XRP’s utility.
• This move could attract institutional interest by offering a compliant and streamlined way to earn yield on XRP holdings.

The XRP Ledger is on the cusp of a potential transformation that could draw in significant institutional capital. Evernorth, a leading XRP treasury company, has thrown its weight behind the XLS-66 proposal, which aims to unlock native, institutional-grade yield on XRP holdings. This development arrives as market participants seek secure and compliant ways to generate returns in the digital asset space.

Evernorth’s Strategic Rationale

Evernorth’s support for XLS-66 is driven by the desire to convert idle XRP, whether held on exchanges or in cold storage, into yield-generating assets. The XLS-66 amendment proposes Single-Asset Vaults that support fixed-term, fixed-rate lending directly on the XRP Ledger. This eliminates the need for bridges, wrapped tokens, or external DeFi platforms, streamlining the process and reducing potential risks. For Evernorth, this means potentially optimizing the use of its substantial XRP holdings, which currently stand at 388.71 million XRP.

Institutional Appeal of XLS-66

The key advantage of XLS-66 lies in its potential to provide a compliant and streamlined yield-earning mechanism for institutions. By keeping assets fully on-ledger, organizations can reduce tax exposure, operational complexity, and smart-contract risks. This aligns with traditional treasury management practices, making XRP more attractive to institutions that are typically wary of the complexities and risks associated with decentralized finance. The ability to earn yield without moving assets across chains is a significant draw for regulated entities.

Impact on the XRP Ecosystem

Beyond institutions, XLS-66 could also benefit retail users and the broader XRP Ledger ecosystem. The proposal promises to improve capital efficiency, deepen on-chain liquidity, and expand XRP’s utility beyond its traditional role in payments and settlement. By creating new avenues for earning yield, XLS-66 could attract more participants to the XRP Ledger, fostering a more vibrant and robust ecosystem. The increased utility could also lead to greater demand for XRP, potentially driving up its value.

Validator Voting and Community Concerns

The XLS-66 proposal has entered the validator voting phase following the release of XRPL v3.1.0. This is a critical step in determining whether the amendment will be implemented on the XRP Ledger. However, the proposal has also raised concerns among some XRP community members, particularly regarding its potential impact on existing third-party lending platforms. These platforms currently offer yield opportunities by requiring users to convert XRP into wrapped tokens and deploy them across various DeFi protocols.

Complementary, Not Competitive

Despite concerns about competition, prominent voices within the XRP community argue that native XRPL lending would complement, not displace, third-party offerings. For example, users could potentially move assets between different platforms to take advantage of varying yield opportunities. This suggests that XLS-66 could create a more interconnected and dynamic DeFi landscape within the XRP ecosystem, where users have access to a wider range of options for generating yield on their XRP holdings.

The XLS-66 proposal represents a significant step towards unlocking the full potential of XRP and attracting institutional capital to the XRP Ledger. While challenges and concerns remain, the potential benefits of on-ledger lending are substantial. If approved, XLS-66 could transform XRP from a primarily payments-focused asset into a versatile financial instrument with broader appeal.

Related: Bitcoin Dumps: Crypto Liquidity Signals

Source: Original article