FXRP Becomes First XRP Collateral for RLUSD Loans on Ethereum

Flare has given XRP a new use case in DeFi. The network announced that FXRP is now approved as collateral in Sentora's RLUSD Main vault on Morpho. This is the first time a version of XRP has been accepted as collateral in an institutionally managed lending vault on Ethereum.

The move lets XRP holders borrow Ripple's RLUSD stablecoin without selling their XRP. It also brings one of crypto's biggest assets deeper into Ethereum's DeFi ecosystem.

XRP Holders Can Borrow Without Selling

The new market runs on Morpho Blue, a permissionless lending protocol on Ethereum.

Users first mint FXRP through Flare's FAssets system. They then bridge it to Ethereum, deposit it as collateral, and borrow RLUSD.

This means XRP holders can unlock cash while still keeping exposure to XRP. Instead of selling their coins, they can use them as collateral and keep their position if the price rises.

The market is also open to everyone. Users do not need approval or a whitelist to join.

Why This Is a Big Deal

Wrapped assets already exist across DeFi. But Flare says this launch is different.

Before adding FXRP, Sentora reviewed the asset under its institutional risk process. The team looked at market liquidity, price behavior, oracle design, and how liquidations would work during market stress.

That review gave FXRP approval to enter the RLUSD lending market.

Flare Co-founder and CEO Hugo Philion said the goal is to solve one of XRP's biggest problems.

"XRP is one of the largest assets in crypto and one of the least used in DeFi. That gap came down to infrastructure."

He added that getting approved by an institutional risk team is a stronger milestone than simply listing the asset on another bridge.

A $280 Million RLUSD Vault

The lending market launches inside Sentora's RLUSD Main vault, which holds about $280 million in RLUSD deposits. That makes it the largest institutionally managed RLUSD vault on Ethereum.

Sentora believes the move will bring one of crypto's most liquid assets into on-chain lending.

Jesus Rodriguez, Co-founder and CTO-CPO of Sentora, said XRP's size makes it a natural fit for DeFi credit markets.

By adding FXRP as collateral, he said the company is helping turn XRP into a more productive asset.

How It Works

The process is simple.

Users mint FXRP on Flare. They bridge it to Ethereum through Stargate. Next, they deposit FXRP into the new lending market on Morpho Blue. Finally, they borrow RLUSD against their collateral.

Borrowers must stay below the allowed loan-to-value ratio. If the value of the collateral falls too much, the position can be liquidated.

Interest rates change based on how much RLUSD is being borrowed.

Morpho Blue also uses isolated markets. That means each lending pool manages its own risk instead of sharing it across the whole protocol.

More Utility for XRP

For years, XRP has been known mainly for payments and cross-border transfers. It has played a much smaller role in DeFi than assets like ETH or wrapped Bitcoin.

FXRP changes that.

It gives XRP holders access to Ethereum lending without giving up ownership of their coins.

Every FXRP position also starts on Flare before moving to Ethereum. As more users borrow against FXRP, activity could grow across Flare's network as well.

Flare Wants to Make It Easier

Today's process still has several steps. Users must mint FXRP first and then bridge it to Ethereum.

Flare says it plans to simplify that flow.

The company is building Flare Smart Accounts. These accounts would let users start the whole process from an XRP Ledger wallet. The system would handle the minting, bridging, collateral deposit, and RLUSD loan in the background.

Flare is also working on direct FXRP minting from XRPL to Ethereum. That would remove the separate bridge step and make the process faster.

The Bottom Line

This launch gives XRP another real use case.

Holders can now borrow RLUSD without selling their XRP. At the same time, FXRP has cleared an institutional risk review and entered one of Ethereum's largest RLUSD lending vaults.

Whether the market sees strong adoption is still unknown. But the infrastructure is now in place.

If more users begin using FXRP as collateral, XRP could become a bigger part of Ethereum's growing DeFi economy while giving holders a new way to put their assets to work.

This article is sponsored by Market Across.