A proposed upgrade to the XRP Ledger (XRPL) could fundamentally shift who holds XRP by allowing banks and financial platforms to absorb the costs associated with operating on the network.
The Sponsor amendment, based on the XLS-68 Sponsored Fees and Reserves proposal, would enable a company to pay account reserves and transaction fees for another XRPL user while that customer retains control of their account and private keys. This feature is designed to remove friction in deploying products on the network, particularly the requirement that every customer acquire and manage XRP before interacting with tokenized assets or other applications.
How Sponsorship Would Work
Under the proposed system, a sponsor such as a bank, issuer, or platform would cover XRP costs on behalf of users. Account reserves would remain required in XRP, and transaction fees would continue to be paid in the token and destroyed when transactions settle. Businesses would effectively become the XRP holders supporting customers who themselves own none.
Currently, the XRPL requires a base reserve of 1 XRP per account and 0.2 XRP per standard owner-reserve unit, though validators can change these parameters. Under sponsorship, the XRP allocated to a user's reserve would remain in the sponsor's account while the ledger records which party is responsible for the obligation.
Concentration at Scale
A business sponsoring 1,000 customer accounts would carry approximately 1,000 XRP of additional base-reserve requirements alongside its own reserve under current parameters. For a firm serving 1 million users, this could theoretically amount to about 1 million XRP of base-account reserve obligations, not accounting for trust lines, token-related objects, or transaction fees.
This structure means that wider XRPL adoption would not necessarily create an equivalent number of new retail XRP holders. Instead, a bank could onboard a large customer base while purchasing and managing XRP centrally, effectively concentrating the network's reserve requirements among a smaller group of institutional sponsors.
Capital Commitments and Complications
The sponsorship model introduces capital-management challenges for institutions. An XRP reserve remains committed while the sponsored account depends on it, and a company cannot necessarily assume the XRP becomes available immediately when a customer stops using its service.
Under the proposed mechanism, a sponsorship can be ended or reassigned, but account sponsorship carries conditions. A beneficiary taking over its own reserve would need enough XRP to satisfy the requirement. A customer who never acquired XRP may be unable to take over the reserve when a bank wants to stop sponsoring the account.
Banks considering sponsorship would need to model customer churn, average reserve requirements, transaction-fee consumption, and how much XRP could remain committed to inactive but still-open accounts.
Regulatory Status
The proposal remains some distance from activation. As of press time, XRPScan data showed only six validators supporting the amendment, short of the 29-validator threshold required for approval, with no activation date scheduled.
If the Sponsor amendment gains sufficient validator support and clears the required activation period, banks and platforms would then need to decide whether removing XRP from their customer experience is worth carrying the token themselves as an infrastructure cost on their balance sheet.
