What factors are influencing XRP’s transition to DeFi?

The following is a guest post and analysis from Vincent Maliepaard, Marketing Director at Sentora.

2025 has signified a pivotal moment for XRP, merging remarkable price increases with significant changes in its foundational narrative. In July, the token reached an unprecedented peak of $3.58, partly driven by crucial legal victories. Beyond the price fluctuations, Ripple’s introduction of the RLUSD stablecoin has gained notable traction, and the network is now intensifying efforts to broaden XRP’s presence within the DeFi landscape.

The groundwork for XRP’s surge was established when the SEC withdrew its lawsuit against Ripple, alleviating a considerable regulatory burden that had dampened institutional interest for several years. This legal resolution, along with the Trump administration’s supportive stance on cryptocurrency, including the GENIUS Act, sparked a wider bullish trend across digital assets.

The token has also profited from a strategic reassessment as institutional investors shifted their focus toward underrepresented large-cap cryptocurrencies, acknowledging XRP as a legitimate capital layer rather than merely a speculative trading instrument.

This perspective was further validated by Ripple’s launch of the RLUSD stablecoin in late 2024, which rapidly grew to a $600 million market capitalization and showcased real-world utility in fostering adoption momentum. The ecosystem has continued to expand with the introduction of the XRPL EVM sidechain, improving interoperability and smart contract capabilities, while anticipation builds around the possible approval of an XRP ETF that could further enhance institutional uptake.

Let’s delve into a detailed analysis of XRP’s growth and momentum, new participants in the ecosystem, and XRP’s advancements in DeFi.

XRP’s Growth and Momentum

XRP’s concentration dynamics illustrate a well-established institutional ownership framework that resembles traditional financial assets, with the top 10 wallets holding about 41% of the circulating supply, increasing to 50% among the top 20 holders and exceeding 70% within the top 100. This concentration trend suggests institutional capital allocation rather than retail speculation, reinforcing XRP’s transition into an institutional asset class.

The token’s evolution from a previous cycle underperformer to a preferred choice received substantial validation through Coinbase’s integration. In July, the exchange introduced cbXRP, a wrapped token backed 1:1 by XRP specifically crafted for cross-chain functionality. This infrastructure enhancement immediately unlocked new applications, with Moonwell becoming the first significant DeFi protocol to support cbXRP, allowing community members to lend and borrow the wrapped token within the platform’s DeFi ecosystem.

Source: defirisk.sentora.com

The growth of cbXRP on Moonwell has been consistent, gradually increasing to over $1.2 million in liquidity since its launch in June. While this figure may be modest compared to XRP’s typical multi-billion dollar headlines, it represents a significant milestone in XRP’s DeFi journey.

These advancements indicate a fundamental transformation in how traditional exchanges and DeFi protocols are positioning XRP, moving beyond mere trading solutions. The combination of concentrated institutional ownership, improved technical infrastructure through wrapped tokens, and expanding lending markets illustrates that XRP is gaining adoption momentum as capital increasingly acknowledges its utility as a cross-border settlement layer and an institutional-grade digital asset.

Expanding into DeFi

The growth of XRP in decentralized finance signifies a natural evolution for what Gabriel Halm of Sentora describes as a blockchain that has “successfully established itself as a digital payment network,” with DeFi development being “an intuitive next step in creating a comprehensive finance ecosystem for XRP.” This progression addresses a crucial gap in XRP’s utility, as the token has historically lacked essential DeFi primitives.

Flare Network has emerged as one such infrastructure provider for XRPFi, through the introduction of FAssets—which upon launch, allows XRP holders to convert their tokens into FXRP, a wrapped version of XRP. This operates within a non-custodial, trust-minimized framework that utilizes smart contracts for cross-chain verification.

Upcoming Yield Opportunities for XRP in DeFi

While users can currently earn a modest yield (approximately 0.1% at present) by supplying cbXRP on Moonwell, significantly higher returns may be forthcoming with the impending launch of the Firelight Protocol on Flare.

Firelight aims to bring economic security and yield generation to the XRP ecosystem, similar to how EigenLayer has unlocked additional staking yield for Ether. By utilizing staked XRP for economic security, Firelight’s architecture could facilitate innovative DeFi applications—such as on-chain insurance—that were previously unattainable.

As Hugo Philion, Co-Founder of Flare Network, articulates:

“Firelight offers on-chain XRP yield opportunities, both for institutions and retail holders, improving capital efficiency for XRP and further bolstering its utility.”

Looking Ahead

XRP’s growth narrative is transitioning from short-term price cycles to long-term structural development. The convergence of regulatory clarity, institutional adoption, and DeFi expansion, driven by platforms like Base, Moonwell, Flare, and Firelight, enhances XRP’s utility and potentially positions it as a yield-bearing asset.

While it may not yet dominate the DeFi space, these developments could reinforce XRP’s role as a bridge between traditional finance and emerging on-chain opportunities.

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