XRP News Today: BIS Risk Weights Stifle XRP's Bank Liquidity Role

XRP, the digital asset developed by Ripple, is not currently being used at high volumes by banks for cross-border liquidity due to regulatory constraints rather than technical limitations, according to insights from crypto investor Mr. Man and former Ripple managing director Navin Gupta, as reported by Timestabloid. Banks remain hesitant to adopt XRP on a large scale because the U.S. dollar remains the primary regulated bridge currency in foreign exchange processes.

Regulatory frameworks, particularly those enforced by the Bank for International Settlements (BIS), assign a 1250% risk weight to unbacked crypto assets like XRP, requiring institutions to hold substantial capital against such holdings, as reported by Timestabloid. This prudential treatment effectively limits the economic viability of using XRP for liquidity purposes.

Mr. Man emphasized that a shift in BIS policy—specifically a reduction in the risk weighting for crypto assets—would be necessary for XRP to gain traction as a bridge asset. He illustrated the potential use case: instead of converting British pounds to U.S. dollars and then to Philippine pesos, banks could one day transact directly from pounds to XRP and then to pesos, bypassing the dollar intermediary, as reported by Timestabloid. Navin Gupta further clarified that XRP's role in Ripple's infrastructure is as a bridge asset enabling the movement of stablecoins like RLUSD and other currencies. For instance, a transaction from GBP to PHP would involve converting GBP to XRP and then XRP to PHP, all executed in seconds via Ripple's software, as reported by Timestabloid.

Recent developments, however, suggest incremental progress. Ripple has partnered with Mastercard, Gemini, and WebBank to test RLUSD, a U.S. dollar-backed stablecoin, for settling credit card transactions on the XRP Ledger (XRPL), as reported by Zycrypto. The pilot, announced at Ripple's Swell 2025 conference, aims to demonstrate how regulated stablecoins can streamline traditional payment infrastructure while maintaining compliance. WebBank, which issues Gemini's crypto-rewards credit cards, will explore using RLUSD to settle Mastercard transactions on the XRPL, pending regulatory approvals, as reported by Zycrypto. If successful, this would mark one of the first instances of a U.S. bank using a public blockchain for fiat credit card settlements, as reported by CoinCodex.

The initiative aligns with broader industry trends. Mastercard has been expanding its crypto partnerships, including a collaboration with Chainlink for on-chain crypto purchases, while Ripple recently raised $500 million to bolster its valuation to $40 billion, as reported by Zycrypto. RLUSD, launched in late 2024, has already surpassed $1 billion in circulating supply and is backed by cash reserves through BNY Mellon, as reported by CoinCodex. Ripple President Monica Long highlighted that the project seeks to bring blockchain's speed and efficiency to backend payment systems without altering the consumer experience, as reported by CoinCodex.

Despite these strides, regulatory hurdles persist. The BIS's risk weighting remains a critical barrier, as reducing it would unlock XRP's potential as a cost-effective, fast alternative to traditional dollar-based settlements, as reported by Timestabloid. Until then, XRP's adoption will likely remain limited to niche use cases, such as the RLUSD pilot, which demonstrates its utility within a compliant framework.