XRP holders can now borrow Ripple's RLUSD stablecoin on Ethereum by depositing wrapped XRP as collateral through Morpho Blue, a decentralized lending protocol. The integration allows users to convert XRP into FXRP tokens on the Flare network, bridge them to Ethereum via Stargate, and deposit them into a Morpho Blue vault to borrow against.
This is the first institutionally-managed XRP collateral vault on Ethereum, according to available reports. The mechanism bypasses the need to sell XRP holdings to obtain RLUSD, instead using the token as collateral for loans denominated in the stablecoin. Morpho Blue operates as a permissionless lending protocol where users supply capital and borrowers post collateral to draw loans at algorithmically-determined rates.
RLUSD is Ripple's USD-pegged stablecoin, launched in 2023 and designed to settle payments on the XRP Ledger and other blockchains. The token has expanded to Ethereum and other chains as Ripple builds out on-chain infrastructure for institutional payments. FXRP, the wrapped version used for collateral, trades on Flare, a blockchain built to enable smart contracts on the XRP Ledger.
The integration requires multiple steps: users wrap their XRP into FXRP on Flare, bridge the wrapped tokens to Ethereum via Stargate's cross-chain bridge, then deposit into the Morpho Blue vault. Users moving XRP liquidity across ecosystems can now access DeFi opportunities on Ethereum where they previously could not.
Morpho Blue launched in September 2023 as a simplified alternative to Aave, allowing any user to create lending and borrowing pairs without governance. The protocol has grown to hold billions in total value locked as institutions and retail users deposit collateral and borrow stablecoins or other assets. Adding XRP as accepted collateral expands the protocol's asset base and gives XRP holders a DeFi yield opportunity on Ethereum.
The vault's terms, including loan-to-value ratios and liquidation thresholds, are set by the vault creator and disclosed on-chain. No figures for total value locked, active borrowers, or specific borrowing costs have been published for the vault yet. The integration demonstrates that XRP can serve as collateral in Ethereum's lending markets, though adoption will depend on borrowing demand and competitive rates against other collateral options.
