Ripple has introduced a groundbreaking infrastructure called Permissioned Domains on the XRP Ledger (XRPL), enabling banks and regulated financial institutions to operate directly on-chain within verified regulatory frameworks. This development addresses a long-standing barrier to institutional adoption by providing the necessary operational and regulatory assurances that were previously missing.
According to David Schwartz, former Ripple CTO and current board member, the limited on-chain banking activity was not due to technical limitations but rather the lack of guarantees around liquidity providers and verified counterparties. Institutions required a framework ensuring all participants met strict regulatory standards, a gap that had blocked potential capital flows worth billions of dollars.
The implementation of Permissioned Domains allows regulated entities to operate in verified networks where compliance is assured, facilitating direct on-chain settlements that align with banking sector regulations. Concurrently, the XRP Ledger has seen a significant uptick in activity, recording 1.88 million payments, driven by new institutional tools.
The next major milestone is the launch of a Permissioned DEX (Decentralized Exchange) scheduled for February 18. This platform will feature exclusive institutional liquidity pools designed for direct trading of large XRP volumes on-chain. The DEX aims to provide a regulated environment for liquidity provision and trade execution, a first for the ledger.
Ripple's strategy positions XRP as a core infrastructure layer for institutional settlement and liquidity, moving beyond speculative use. The company's "Institutional DeFi" blueprint outlines how the XRPL is evolving with new features like Single-Asset Vaults and the Lending Protocol (XLS-66), which allow institutions to borrow and lend directly on the blockchain. These features are designed as composable building blocks, with XRP acting as the settlement asset, bridge, and fee mechanism.
This institutional push is part of a broader trend toward tokenization, with a White House digital assets advisor projecting mainstream adoption within one to three years. Tokenized commodities have already surpassed $5 billion in value, though activity is currently concentrated on other platforms like Ethereum and Polygon.
