Ripple's Permissioned DEX: Low Adoption Despite Compliance Focus
Ripple Launches Permissioned DEX on XRPL
Ripple has introduced a permissioned decentralized exchange (DEX) feature on the XRP Ledger (XRPL), aiming to attract institutional investors by addressing compliance concerns. This initiative is designed to bridge the gap between regulatory requirements and decentralized finance (DeFi).
Targeting Institutional DeFi
The new feature has received positive feedback from Yoshitaka Kitao, CEO of SBI Group, a prominent XRP supporter in Japan's banking sector. Ripple's permissioned DEX allows regulated institutions to trade on XRPL while adhering to Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations—key hurdles for traditional finance.
Key Features of Ripple's Permissioned DEX
- Permissioned Domains: Creates controlled environments where only verified accounts can trade.
- Isolated Order Books: Trades occur only between authorized participants within each permissioned domain.
- Compliance Built-In: Leverages verifiable credentials and permissioned domains standards for regulatory compliance.
- No Smart Contracts Needed: Institutions can utilize the DEX without deploying custom smart contracts.
Ripple emphasizes that this allows institutions to immediately utilize XRPL's DEX capabilities with compliance built-in.
Low Adoption Despite Compliance Focus
Despite Ripple's focus on institutional adoption, activity on the XRPL DEX remains low. 24-hour volume is under $50,000, and Total Value Locked (TVL) is below $60 million, according to DefiLlama. This contrasts sharply with the millions of dollars in daily volume seen on smaller Ethereum Layer-2 DEXs like Base.
While the low adoption is a concern, Ripple believes the DEX will support real-world use cases, including:
- Stablecoin/fiat foreign exchange swaps
- Cross-border payroll payments
- B2B stablecoin payments
- Corporate crypto-to-fiat management
Ripple's Institutional Gamble
The XRPL, one of the oldest blockchains with built-in DEX functionality, has seen limited DeFi traction. Ripple's strategy centers on attracting institutions seeking regulatory clarity, hoping that the Permissioned DEX will differentiate the XRPL. Whether this strategy will succeed remains to be seen.
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