Ripple is introducing an institutional lending function on the XRP Ledger (XRPL) as it moves to target the global private credit market worth more than $10 billion.

On Aug. 20, blockchain outlet U.Today reported that the RippleX development team said it plans to add the institutional lending function to XRPL in cooperation with Clearpool Finance and Cicada Partners.

The lending structure focuses on supplying funds to operating businesses rather than circulating speculative capital within decentralised finance. It sets businesses that need working capital, such as fintech and payments companies, as borrowers and envisions channelling part of tokenised private credit funds into XRPL.

Loans will use Ripple’s regulated stablecoin RLUSD. RLUSD operates based on oversight by the New York State Department of Financial Services and a custody system at Bank of New York Mellon.

Key steps in the lending system will be handled on XRPL. All procedures, from creating lending pools to executing loans and repayments, will take place on the network. Users will therefore need to use XRP to pay fees and maintain wallet reserves.

That could also be linked to expanded real-world use of XRP. If institutional lending becomes active on XRPL, network activity would increase and uses for XRP could also expand. The RippleX development team also presented increased network activity and expanded token utility as key value of the overhaul.

On security, it seeks to differentiate itself from existing DeFi approaches that rely on external smart contracts. It plans to implement lending logic directly in the blockchain’s base protocol and apply XRPL’s XLS-65 single-asset vault and the proposed XLS-66 lending protocol amendments.

It also includes safeguards to protect institutional funds. A digital participant identity system and a clawback function for forced return of funds will be applied, and Ripple will participate in the lending fund as a general investor rather than a financial guarantor. It is a pari passu approach in which it bears the same rights and risks as third-party institutions.

Clearpool is currently testing full user scenarios for the lending function on a developer network. The mainnet deployment timeline has not yet been confirmed. Independent XRPL validators must approve and activate the XLS-65 and XLS-66 amendments for them to be reflected on the mainnet.

Ultimately, the core of the plan is whether tokenised private credit funds can actually flow into XRPL and whether the institutional lending function can win approval from XRPL governance. Loans themselves use RLUSD, but the network’s operating process requires XRP. Attention is on whether the move will lead to an expansion of XRPL’s financial infrastructure and increased real-world use of XRP.