XRP is becoming collateral for real loans and the first market is already dominated by whales

XRP is beginning to support live dollar borrowing on Ethereum, though the market remains heavily concentrated among a handful of borrowers.

A Morpho market backed by FXRP, a tokenized representation of XRP, had about 7.18 million RLUSD in outstanding loans against 10.76 million FXRP as of Oct. 1. The three largest addresses accounted for almost all of that debt, limiting how far the activity can be read as broad adoption.

The market, launched in August through Flare, lets XRP holders mint FXRP, move it to Ethereum, and borrow Ripple's RLUSD stablecoin without immediately selling their XRP exposure.

That adds a new credit use case for XRP, but also introduces bridge, collateral, and redemption dependencies that borrowers do not face when holding native XRP directly.

Three borrowers dominate XRP’s emerging credit market

The early borrowing activity is heavily concentrated among a small number of participants.

The three largest addresses account for 93% of roughly $7.2 million in outstanding debt, giving a handful of positions outsized influence over the market's size. A large repayment could sharply shrink borrowing, while another loan from the same wallets could lift the total without bringing in many new users.

The concentration may be even greater than the address count suggests. On-chain records identify wallets rather than their owners, so several addresses could belong to the same investor or institution.

Funding is similarly concentrated. Sentora RLUSD Main supplied about 8.53 million RLUSD, providing nearly all of the liquidity available to borrowers at the time observed. Even so, the FXRP market represents only about 2.03% of Sentora's broader vault allocations, leaving room to commit more capital if demand increases.

Sentora can supply up to 10 million RLUSD under the current limit. That gives borrowers room to take on more debt, though the spare capacity says little about whether a wider group of XRP holders will actually use it.

The same concentration could become more important if XRP price weakens.

Morpho allows lenders to liquidate a position once the value of its debt rises above 77% of the collateral backing it. The three biggest borrowers remain well away from that point. Based on their current debt and collateral, the largest position could withstand roughly a 45% decline in the FXRP-to-RLUSD ratio, while the next two have buffers of about 38%.

Some smaller borrowers have less room. One position with about 121,000 RLUSD of debt against 133,000 FXRP could reach its liquidation threshold after roughly a 21% decline, assuming the position otherwise remains unchanged.

The market recorded some liquidations in September but showed no realized or unrealized bad debt as of Oct. 1. A sharper move would provide a more meaningful test because a liquidator taking over one of the largest positions would suddenly have to absorb a sizeable amount of FXRP.

That would not necessarily mean the underlying XRP is immediately sold. A liquidator could hold the FXRP, sell it, move it back toward Flare, or redeem it for native XRP.

For now, the bigger issue is how quickly a few large wallets can reshape the market. New borrowers spreading the debt across more addresses would make the $7.2 million total more representative of broader demand. If activity remains concentrated, a single large repayment, new loan, or liquidation could materially change the market almost overnight.

Native lending could broaden XRP credit without creating new buyers

The concentration in Morpho may prove temporary as developers prepare to bring lending directly onto the XRP Ledger.

XRPL’s proposed lending architecture, which is currently undergoing security reviews, would allow fixed-term credit to originate on the network rather than requiring XRP holders to mint FXRP, bridge it to Ethereum, and borrow through Morpho.

Removing those steps could make XRP-backed credit easier to access and give institutions another way to use XRPL assets for financing and liquidity management. It would also introduce a different credit model from Morpho’s overcollateralized loans, with underwriting handled before fixed-term loans are created.

More lending, however, would not necessarily translate into fresh demand for XRP. Existing holders could simply deploy XRP they already own, while institutions could recycle existing balances through lending markets. Outstanding debt could therefore rise substantially without a corresponding increase in the number of XRP owners or the amount of new capital entering the token.

That makes borrower composition as important as loan volume. A market that grows because the same large holders increase their borrowing would deepen XRP’s utility without demonstrating broader adoption. Growth spread across new borrowers, larger lending pools, and sustained activity after repayments would provide stronger evidence that credit is widening the asset’s economic use.

Native lending will provide the next test. If the amendments clear their security reviews and gain validator approval, XRP holders would have a direct lending route on XRPL alongside the existing Ethereum-based Morpho market.

The comparison will show whether reducing cross-chain friction attracts a broader borrower base or simply gives existing XRP holders another way to leverage the same capital.