XRP Holders Can Now Borrow Ripple’s RLUSD on Ethereum Using FXRP as Collateral

XRP holders can now use their assets as collateral to borrow Ripple's RLUSD stablecoin on the Ethereum network. This follows the approval of Flare's FXRP as collateral within Sentora's RLUSD Main vault. This marks the first time an XRP-based asset has been accepted as collateral in an institutionally curated Ethereum lending vault.

Users can convert XRP into Flare's FXRP token, bridge it to Ethereum, deposit it as collateral on the Morpho lending protocol, and then borrow RLUSD. This collateralized lending model allows borrowers to maintain exposure to XRP's price fluctuations while accessing dollar-pegged liquidity.

The CEO of Flare noted that XRP, despite being a significant crypto asset, has been underutilized in decentralized finance due to infrastructure limitations. The integration of XRP as collateral, underwritten by an institutional risk team on the Ethereum mainnet, represents substantial recognition beyond a mere bridge listing.

This mechanism mirrors Wrapped Bitcoin (WBTC), enabling Bitcoin holders to engage with Ethereum-based decentralized finance without divesting their BTC. FXRP aims to provide similar access for XRP holders to Ethereum lending markets. Lending operations are conducted on Morpho Blue, which employs isolated lending markets to mitigate risk associated with individual assets.

Sentora affirmed that it conducted a comprehensive review of FXRP's market behavior, oracle design, liquidity, and liquidation mechanics prior to its approval as collateral.

This launch aligns with Ripple's strategic efforts to position RLUSD as an enterprise-focused stablecoin. Ripple commenced testing RLUSD for cross-border payments on both Ethereum and the XRP Ledger in August 2024. In December 2024, the company secured approval from the New York Department of Financial Services in anticipation of the stablecoin's official launch.

Mastercard announced its support for the settlement of regulated stablecoins, including RLUSD, Circle's USDC, and SoFi's SoFiUSD, last month. The Co-Founder and CTO-CPO of Sentora indicated that this advancement significantly enhances XRP's utility within the on-chain environment, addressing its previous underutilization in on-chain credit despite its status as one of crypto's largest and most liquid assets.