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XRP Ledger Enhances Regulatory Compliance with AMMClawback Amendment

Coin WorldThursday, Jan 30, 2025 7:42 pm ET

1min read

The XRP Ledger (XRPL) has recently activated the AMMClawback amendment, a significant update aimed at enhancing the regulatory compliance of its Automated Market Maker (AMM) pools. This upgrade, which garnered 91.43% consensus from validators, empowers token issuers to retrieve assets from liquidity pools under specific conditions, ensuring stricter adherence to regulatory requirements.

The AMMClawback amendment introduces new rules governing liquidity pools, particularly for tokens with regulatory concerns. It enables token issuers to retrieve assets from AMM pools under predefined circumstances. If a token is frozen, users will no longer be able to deposit new assets into the associated liquidity pool, preventing unauthorized transactions involving frozen tokens.

This development comes on the heels of Ondo Finance's confirmation to expand tokenized assets on the XRPL. The OUSG deployment will enhance institutional liquidity and regulatory compliance, reflecting strong market confidence as both ONDO and XRP prices surged following the news.

With the AMMClawback amendment now active, the creation of an XRP/RLUSD AMM pool is now possible. This development will improve liquidity for both XRP and Ripple USD (RLUSD), a stablecoin launched in December 2024. Previously, RLUSD could not participate in AMM pools due to its built-in clawback feature. This limitation has now been removed, allowing RLUSD holders to contribute liquidity and trade seamlessly within the XRP Ledger ecosystem, potentially enhancing decentralized finance (DeFi) activity on the network.

The amendment introduces stricter deposit rules for liquidity providers. If one of the paired tokens is frozen, wallets cannot deposit single-sided or double-sided assets into an AMM pool. Additionally, unauthorized accounts can deposit only once if the paired asset is allowed. Token issuers must now use the AMMClawback function to retrieve assets from pools instead of the standard clawback transaction, providing a structured approach to enforcing compliance without disrupting normal trading activity on the XRP Ledger.

The amendment received 28 out of 35 votes from validators, surpassing the 80% threshold required for approval. The XRP Ledger community expects this change to improve regulatory alignment while expanding opportunities for decentralized liquidity.

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