A new route has opened for XRP holders to borrow Ripple’s stablecoin RLUSD without selling their holdings. Flare’s XRP-based asset FXRP was approved as collateral in an Ethereum-based lending market, expanding the previously limited DeFi use of XRP.

On Aug. 3, blockchain outlet Decrypt reported that Flare’s FXRP was approved as collateral in Centora’s RLUSD main vault. It became the first case of an XRP-based asset being included in an institution-screened Ethereum lending vault.

Under the linkage, users can convert XRP into FXRP on the Flare network and move it into the Ethereum ecosystem, where it can be deposited as collateral on the Morpho lending protocol. They then borrow Ripple’s stablecoin RLUSD.

The key is that users can secure dollar-based liquidity without selling XRP. Users can raise funds while maintaining exposure to XRP price fluctuations. It is a structure similar to Wrapped Bitcoin (WBTC), which enables bitcoin to be used in Ethereum DeFi.

FXRP serves as a link between XRP and the Ethereum lending market. XRP has established itself as a major crypto asset by market capitalisation, but it has shown relatively limited use in DeFi such as on-chain lending.

Hugo Philion (휴고 필리온), Flare’s co-founder and chief executive officer, explained that XRP is one of the largest assets in the crypto market but has been among the least used in DeFi. He said the issue was not the asset itself but a lack of infrastructure to use it. He said, "XRP has now become a collateral asset on Ethereum mainnet that institutional risk teams can accept," stressing that it meant more than a simple bridge listing.

The lending market operates on Morpho Blue. Morpho Blue is structured to create independent lending markets by asset, reducing the spread of risk from a specific asset across the overall protocol.

Centora said it reviewed the market trading structure, oracle design, liquidity level and liquidation mechanism before adopting FXRP as collateral. It said it applied risk management standards at a level accessible to institutional investors.

The move is also linked to Ripple’s strategy to expand the use of RLUSD. Ripple is fostering RLUSD as an enterprise stablecoin and last year tested its potential use for cross-border payments on Ethereum and the XRP Ledger. It later laid the groundwork for an official launch through approval by the New York State Department of Financial Services (NYDFS).

More recently, Mastercard announced plans to support payments with regulated stablecoins, including RLUSD, extending the push to expand areas of use.

Jesus Rodriguez (헤수스 로드리게스), Centora’s co-founder and chief technology officer and chief product officer, pointed out that XRP has high liquidity and market scale but has not been sufficiently used in on-chain credit markets. He said the introduction of FXRP would change how XRP is used.

With the linkage, RLUSD expanded its use beyond a simple payment method and into collateral and borrowing structures in DeFi lending markets. XRP holders can now secure stablecoin liquidity without disposing of their assets, and an assessment has emerged that Ripple and Flare have laid the groundwork to expand XRP into an institution-friendly DeFi collateral asset.