XRP has begun supporting dollar borrowing on Ethereum through a Morpho market backed by FXRP, a tokenized representation of XRP. As of October 1, the market held approximately 7.18 million RLUSD in outstanding loans against 10.76 million FXRP in collateral. However, three large addresses accounted for nearly all of that debt.
The market, which launched in August through Flare, allows XRP holders to mint FXRP, transfer it to Ethereum, and borrow Ripple's RLUSD stablecoin without immediately selling their XRP. This creates a new credit use case for the asset, though it introduces dependencies on bridge infrastructure, collateral management, and redemption processes that holders do not face with native XRP directly.
Heavy Concentration Among Borrowers
The three largest addresses account for 93% of the roughly $7.2 million in outstanding debt. This concentration gives a small number of positions outsized influence over the market's size. A large repayment could sharply shrink borrowing, while additional loans from the same wallets could expand the total without bringing in new users.
On-chain records identify wallets rather than their owners, suggesting the concentration may be even greater than the address count indicates, as multiple addresses could belong to the same investor or institution.
Liquidity provision is similarly concentrated. Sentora RLUSD Main supplied approximately 8.53 million RLUSD, providing nearly all available liquidity to borrowers at the time observed. The FXRP market represents only about 2.03% of Sentora's broader vault allocations, leaving room for additional capital if demand increases.
Liquidation Risk and Market Dynamics
Morpho allows lenders to liquidate positions once debt rises above 77% of collateral value. The three largest borrowers remain well below this threshold. The largest position could withstand roughly a 45% decline in the FXRP-to-RLUSD ratio, while the next two have buffers around 38%. Some smaller borrowers have less cushion, with one position able to reach liquidation after roughly a 21% decline.
The market recorded some liquidations in September but showed no realized or unrealized bad debt as of October 1. A sharper price move would provide a more meaningful test of the system, particularly if a liquidator had to absorb a sizable position from one of the largest borrowers.
Future of XRP-Backed Credit
The concentration in Morpho may prove temporary as developers prepare to bring lending directly onto the XRP Ledger. A proposed lending architecture, currently undergoing security reviews, would allow fixed-term credit to originate on the network rather than requiring holders to mint FXRP, bridge it to Ethereum, and borrow through Morpho.
Native lending could make XRP-backed credit easier to access and provide institutions another financing and liquidity management tool. However, growth in lending volume would not necessarily indicate broader adoption. Existing holders could simply deploy XRP they already own, while institutions could recycle existing balances through lending markets. Outstanding debt could rise substantially without an increase in the number of XRP owners or new capital entering the token.
If the proposed amendments clear security reviews and gain validator approval, XRP holders would have a direct lending route on the XRP Ledger alongside the existing Ethereum-based Morpho market. That comparison will show whether reducing cross-chain friction attracts a broader borrower base or simply gives existing holders another way to leverage the same capital.
