XRP's Path to Institutional Adoption and the Trust Gap in Ripple’s ODL Model

In 2025, Ripple’s XRP has emerged as a transformative force in cross-border payments, with its On-Demand Liquidity (ODL) model processing $1.3 trillion in transactions during Q2 alone [1]. This growth is driven by partnerships with institutions like SBI Holdings, Santander, and PNC Bank, which leverage XRP to reduce settlement times from days to seconds and cut costs by up to 60% in corridors like the U.S.-Mexico route [4]. Yet, despite these advancements, a critical trust gap persists: major banks remain hesitant to fully integrate XRP into their balance sheets, citing liquidity risks, price volatility, and regulatory uncertainties. This article dissects the risks and opportunities of Ripple’s bridge-currency model in the absence of robust balance-sheet buy-in from global financial institutions.

The Rise of XRP in Institutional Payments

Ripple’s ODL model has gained traction by addressing pain points in traditional cross-border systems. By using XRP as a bridge currency, institutions avoid the need for pre-funded nostro accounts, which tie up capital and incur high maintenance costs. For example, Santander has deployed ODL in Brazil and the Philippines, while PNC Bank utilizes it for U.S.-based remittances [3]. In the Asia-Pacific region, 93 institutions are either using or testing ODL, with Tranglo in Malaysia playing a pivotal role despite only 8% of its customers currently settling via XRP [5].

Regulatory clarity has further accelerated adoption. The 2025 resolution of the SEC vs. Ripple lawsuit, which declared XRP a non-security in open markets, removed a major legal barrier, enabling ETF filings and broader institutional confidence [6]. This shift has led to XRP being treated as a treasury reserve asset by firms like Hyperscale Data Inc. and Trident Digital, which have committed $10 million and $500 million to XRP treasuries, respectively [1].

The Trust Gap: Balance-Sheet Hesitancy

Despite operational adoption, major banks remain cautious about holding XRP on their balance sheets. SWIFT CIO Tom Zschach has argued that institutions prefer internal payment rails, tokenized deposits, or regulated stablecoins over external assets like XRP, which do not appear on their balance sheets [1]. For instance, Santander has not disclosed XRP holdings, even though it actively uses RippleNet for real-time settlements [3]. Similarly, Bank of America, while rumored to be piloting ODL, has not committed to XRP as a balance-sheet asset, opting instead for a gradual, compliance-focused approach [3].

This hesitancy stems from three key risks:
1. Liquidity Exposure: XRP’s price volatility and liquidity constraints in certain corridors pose challenges for large transactions. For example, a 470 million XRP whale sell-off in Q2 2025 created market headwinds, raising concerns about slippage in high-volume corridors [1].
2. Regulatory Uncertainty: While the SEC case was resolved, lingering questions about cross-border compliance and anti-money laundering (AML) frameworks deter full-scale adoption.
3. Technological Limitations: XRP’s lack of native smart contract functionality on the base ledger limits its appeal in DeFi ecosystems, though cross-chain solutions like EVM sidechains are mitigating this gap [4].

Risk-Mitigation Strategies and Institutional Confidence

Institutions adopting XRP are employing multi-layered strategies to manage these risks. For example, 62% of surveyed firms use multi-signature wallets and cold storage to secure XRP holdings [2]. Additionally, Ripple’s RLUSD stablecoin, which operates on the XRP Ledger’s EVM sidechain, has facilitated $408 million in DeFi transactions, offering a regulated on-ramp for institutional capital [3].

Regulatory alignment is also critical. Ripple’s expansion into the Middle East via Ctrl Alt and its validator nodes in Africa and South Asia underscore a strategic focus on decentralization and compliance [5]. Meanwhile, the launch of the ProShares Ultra XRP ETF in July 2025, which attracted $1.2 billion in inflows, signals growing institutional confidence in XRP’s utility [6].

The Road Ahead: Bridging the Trust Gap

For XRP to achieve mainstream institutional adoption, Ripple must address the balance-sheet trust gap. This requires:
- Enhanced Liquidity Infrastructure: Expanding validator nodes and liquidity providers in key corridors to mitigate slippage.
- Regulatory Collaboration: Engaging with regulators to establish clear frameworks for XRP’s use in treasury operations.
- Smart Contract Integration: Leveraging EVM sidechains to enable DeFi use cases while maintaining XRP’s energy efficiency and compliance profile.

Conclusion

XRP’s ODL model has redefined cross-border payments, offering unparalleled speed and cost efficiency. However, the absence of balance-sheet buy-in from major banks like Santander and Bank of America highlights a critical trust gap. While regulatory clarity and technological innovation are narrowing this divide, institutional adoption will ultimately depend on addressing liquidity risks, price volatility, and the need for smart contract capabilities. For investors, XRP’s path to institutional adoption is a high-conviction bet on the future of global finance—one where bridge currencies like XRP may coexist with, or even disrupt, traditional systems like SWIFT.

Source:
[1] XRP in 2025: Trends, Technology and Future Outlook for Enterprise Adoption [https://www.linkedin.com/pulse/xrp-2025-trends-technology-future-outlook-enterprise-adoption-mishra-rluve]
[2] Institutional Crypto Risk Management Statistics 2025 [https://coinlaw.io/institutional-crypto-risk-management-statistics/]
[3] Prediction: XRP Will Soar in the Second Half of 2025 [https://www.aol.com/prediction-xrp-soar-second-half-074500008.html]
[4] The XRP Ledger: A New Era in Payment Infrastructure and ... [https://www.bitget.com/news/detail/12560604950503]
[5] Ripple Expands Global Custody Footprint into Middle East with Ctrl Alt [https://ripple.com/ripple-press/ripple-expands-global-custody-footprint-into-middle-east-with-ctrl-alt/]
[6] The Catalysts Behind XRP's Price Momentum in 2025 [https://www.bitget.com/news/detail/12560604951262]