Ripple and Arf want to expand the use of RLUSD and the XRP Ledger (XRPL) in cross-border payments by making short-term settlement liquidity available to payment companies. The initiative will initially rely on direct settlements in RLUSD, and could then evolve to include lending managed on the network, subject to the activation of the necessary amendments.
Announced on October 22, the partnership brings Ripple together with Arf, a regulated Swiss financial institution specializing in settlement services for international payments. The goal is to make it easier for licensed payment companies to access working capital while their transactions are being processed.
Arf has processed nearly $10 billion in international settlements per year since its launch in November 2022. By combining this activity with the XRPL’s transfer capabilities and Ripple’s RLUSD stablecoin, the two partners aim to support a higher volume of payments without requiring companies to tie up as much capital upfront.
A need for liquidity between sending and settlement
In cross-border payments, funds are not always immediately available when a transaction needs to be executed. Providers often have to pre-fund payments, meaning they must commit capital before receiving the funds associated with previous transactions. This requirement can become particularly challenging when they operate across several markets at once.
Traditional bank financing can take a long time to obtain and may require substantial collateral. For some payment companies, these conditions reduce the share of their capital available for day-to-day operations and make it harder to expand their services into new international corridors.
Arf’s proposed model aims to address this need with short-term liquidity. Advances are generally repaid within one to five days, depending on the settlement of the transactions involved. Financing can therefore cover the period during which payments are being processed.
RLUSD for cross-border settlements
Initially, Arf plans to provide settlement liquidity directly using RLUSD on the XRP Ledger. This mechanism is intended to give participating companies access to funds to process more payments, while relying on a stable digital asset designed to track the value of the US dollar.
The XRPL provides infrastructure for the rapid transfer and settlement of digital assets. Combining this infrastructure with RLUSD aims to offer a way to move funds between payment providers without relying solely on traditional financing channels. However, the arrangement remains tied to the use cases and operational needs of the participating companies.
Jasmine Cooper, RippleX’s head of product, highlighted the XRPL’s settlement speed and the regulated infrastructure associated with RLUSD. In her view, these features make the network suitable for institutional liquidity financing. The partnership is therefore part of an effort to connect stablecoins with concrete financial needs, beyond their simple use for transferring digital assets.
Revolving financing for payment companies
Arf’s model is based on reusing capital as transactions settle and financing is repaid. The same pool of liquidity can therefore support different transactions in succession, rather than remaining tied up in a single transaction until it is fully completed.
This revolving liquidity model could help providers meet greater demand without having to build up working capital equivalent to all their outstanding payments. It could also increase operational demand for RLUSD, as the stablecoin would be used repeatedly for disbursements and repayments related to cross-border settlements.
The partnership comes amid growing attention to the utility of the XRP Ledger and its assets. An article about a recent signal regarding XRP usage is available in this analysis of the evolution of the asset’s perceived utility. The Ripple-Arf project, however, specifically concerns payment financing through RLUSD and XRPL infrastructure.
Native lending planned on the XRP Ledger
After this initial phase of direct liquidity, Arf plans to integrate the native lending infrastructure offered by the XRPL. This development could make it possible to structure some financing on the network, using mechanisms designed to pool capital and organize the provision of loans.
Single-asset vaults and a lending protocol
The proposed setup includes single-asset vaults, which would pool capital for financing operations. A lending protocol could then be used to issue structured loans to participating payment companies. These tools are intended to organize the availability and use of funds on the XRPL.
Credit management would not be transferred entirely onto the blockchain. Arf would retain off-chain underwriting and credit-risk decisions, while managing loans on the XRPL. This arrangement would allow credit assessments and processes to remain within Arf’s operational framework, while the network would be used to manage certain stages of the loans.
The move to this infrastructure depends on the approval and activation of amendments XLS-65 and XLS-66. These changes are necessary to enable the deployment of the relevant mechanisms. Arf says it has already developed an implementation and provided feedback on these tools, but their use at a larger scale remains contingent on the network’s development.
What effects could this have on institutional adoption of RLUSD?
The partnership could create recurring use of RLUSD in institutional payment operations. Companies could use the stablecoin to receive financing, make disbursements related to their payments, and then repay advances once the corresponding funds have settled.
These repeated financing cycles could strengthen operational demand for RLUSD if the model is adopted by a growing number of providers. This would depend in particular on transaction volumes, the frequency of pre-funding needs, and companies’ ability to integrate the arrangement into their existing payment processes.
For the XRPL, the challenge is to support financial operations for professional participants by combining rapid transfers, short-term financing, and loan management. The ability to process some of these operations on blockchain infrastructure could differentiate the network from systems in which capital remains tied up while payments are being processed.
A gradual rollout
The first stage relies on the provision of direct liquidity in RLUSD on the XRPL. Integrating lending tools would be a later phase, dependent on the network amendments and their activation. This timeline means that expanding the model will depend as much on the technical availability of the features as on their adoption by the companies concerned.
Results will also depend on whether the financing can address the practical constraints payment companies face: speed of access to funds, duration of advances, repayment terms, and risk management. By connecting Arf’s liquidity, RLUSD, and the XRPL, the partnership aims to offer a solution tailored to the cash-flow needs that arise between the execution and final settlement of international payments.
