Can XRP's EVM Sidechain and Native Stablecoin Drive Sustained Institutional Adoption in 2026?

The XRP Ledger (XRPL) has long been positioned as a high-performance blockchain for cross-border payments and asset tokenization. In 2025, Ripple accelerated its institutional ambitions with two pivotal upgrades: an Ethereum Virtual Machine (EVM) sidechain and the regulated stablecoin RLUSD. These innovations aim to bridge the gap between XRP's native speed and low fees and the broader DeFi ecosystem. But can these upgrades catalyze sustained institutional adoption in 2026?

The EVM Sidechain: A Bridge to DeFi, But With Limited Traction

The XRPL's EVM sidechain, launched in June 2025, enables Ethereum-compatible smart contracts while retaining the XRP Ledger's 3.5-second block time and sub-cent transaction fees. This hybrid model theoretically positions XRP as a scalable alternative to Ethereum for institutional use cases. Early data shows promise: over 1,400 EVM contracts were deployed weekly, and the sidechain's TVL briefly hit $120 million. However, real-world adoption remains muted. By January 2026, the sidechain generated only $38 in chain revenue, with no clear growth trajectory.

The sidechain's reliance on the Axelar bridge introduces custodial risks, as wrapped XRP (wXRP) depends on third-party custodians like Hex Trust and Coinbase. While this expands XRP's liquidity across Ethereum, Solana, and Base, it also exposes users to bridge vulnerabilities and governance challenges. For institutions, these risks may outweigh the benefits of faster transactions unless the sidechain demonstrates consistent utility in DeFi or institutional finance.

RLUSD: A Regulated Stablecoin Gaining Institutional Credibility

Ripple's RLUSD stablecoin, launched in December 2024, has emerged as a cornerstone of its institutional strategy. Fully backed by U.S. dollar reserves and audited monthly by an independent firm, RLUSD operates on both the XRP Ledger and Ethereum, with a NYDFS charter ensuring regulatory compliance. By August 2025, its circulation exceeded $500 million, and it now supports real-world use cases like instant credit card settlements with Mastercard.

RLUSD's technical upgrades, such as TokenEscrow v2.5.0 and UUPS-compatible smart contracts, further enhance its appeal for institutional clients. Its expansion to Ethereum Layer 2 networks via Wormhole also aligns with Ripple's multichain vision. However, the stablecoin's success hinges on broader adoption beyond Ripple's ecosystem. For example, while RLUSD is used in humanitarian aid and derivatives trading, its liquidity remains concentrated on Ethereum-based platforms.

Institutional Partnerships: A Mixed Bag of Progress and Hurdles

Ripple's 2025 institutional partnerships underscore its growing credibility. The SEC's August 2025 settlement resolved years of regulatory uncertainty, paving the way for spot XRP ETFs from REX-Osprey and Grayscale. Meanwhile, Ripple Prime-its crypto-owned prime brokerage-has attracted derivatives traders and institutional clients using RLUSD as collateral. Collaborations with BNY Mellon and Guggenheim Treasury Services (via digital commercial paper on XRPL) highlight XRP's potential in tokenized finance.

Yet, institutional adoption faces headwinds. The EVM sidechain's TVL of $120 million pales in comparison to Ethereum's $40+ billion, and Q4 2025 transaction volume data for the sidechain remains sparse. While the XRP Ledger's daily transactions rose by 8.9% in Q3 2025, this growth is driven more by remittance corridors than DeFi activity. Institutions may also hesitate to adopt the sidechain until it proves its ability to handle large-scale, high-value transactions without custodial intermediaries.

The Path to 2026: Risks and Opportunities

For XRP's 2025 upgrades to drive sustained institutional adoption in 2026, three factors must align:1. Scalability: The EVM sidechain must demonstrate consistent on-chain activity and attract developers beyond early-stage projects.2. Regulatory Clarity: Ripple's pursuit of a federal bank charter for RLUSD and compliance with global regulations will determine its adoption in cross-border payments.3. Liquidity: Wrapped XRP's custodial risks must be mitigated, and RLUSD's liquidity must expand beyond Ethereum to capture broader DeFi markets.

If these conditions are met, XRP could capitalize on its existing advantages-low fees, fast settlement, and institutional partnerships-to become a foundational layer for tokenized finance. However, the sidechain's current performance suggests that 2026 will be a test of execution rather than a guaranteed breakthrough.

Conclusion

XRP's 2025 upgrades represent a strategic leap toward institutional adoption, but their success in 2026 depends on overcoming early limitations. The EVM sidechain's technical strengths are undeniable, yet its low transaction volume and custodial risks remain red flags. RLUSD's regulated framework and real-world use cases provide a stronger foundation, but its liquidity and cross-chain utility must expand. For institutions, the key question is whether Ripple can scale these innovations while maintaining the regulatory and operational rigor that underpins its recent partnerships.