XRP-Backed Loans Push Flare’s FXRP Lending Pool on Morpho to 94.5% Capacity
Demand for XRP-backed borrowing has pushed Flare's FXRP lending market on Morpho close to its available lending capacity, with outstanding loans of Ripple's RLUSD stablecoin reaching $8.77 million. The market has lent out 94.5% of its available RLUSD supply since launching on Ethereum in late July, leaving approximately $500,000 available for borrowers.
The rising utilisation has coincided with a sharp increase in borrowing costs. Users are paying approximately 16% to borrow against FXRP, more than double the average rate recorded the previous week. Meanwhile, lenders supplying RLUSD are earning a yield of 15.3%, according to the reported market figures.
Borrowing Rates Rise as Morpho Pool Nears Capacity
The increase in borrowing costs reflects a typical feature of lending markets such as Morpho, where interest rates generally rise as a greater share of available liquidity is borrowed. With most of the pool's RLUSD already deployed, remaining liquidity has become more limited as demand continues to grow.
The market has expanded steadily since its launch. However, further borrowing will depend on whether additional RLUSD is supplied, given that only around $500,000 remained available at the reported utilisation level.
CoinDesk reported that the market initially launched with a conservative supply cap set by Flare. That limit could increase as usage develops, potentially allowing the lending market to accommodate additional borrowing demand.
How the FXRP and RLUSD Lending Market Works
The pool operates as an isolated FXRP/RLUSD market on Morpho Blue. FXRP is Flare's wrapped representation of XRP, while RLUSD is the stablecoin issued by Ripple. The arrangement allows eligible users to borrow RLUSD using FXRP as collateral without having to sell their XRP exposure.
CoinDesk also reported that Flare's wrapped XRP had been accepted as collateral by Sentora, a firm that manages a $280 million RLUSD lending pool. In Morpho Blue, individual markets have their own collateral asset, debt asset, price oracle and liquidation threshold.
This isolated structure is designed to contain a failure within the affected market rather than automatically exposing the rest of a vault to the same market-specific problem, according to CoinDesk's report. The FXRP/RLUSD market is permissionless, meaning users do not need to be placed on a whitelist to access it.
Four Systems Connect XRP Holders to Ethereum Lending
According to CoinDesk, users can access the market by minting FXRP through Flare's FAssets system, bridging the token to Ethereum through Stargate, depositing it into the Morpho market and borrowing RLUSD at a chosen loan-to-value ratio.
This process enables holders to obtain liquidity against their XRP exposure rather than selling the underlying exposure outright. However, FinanceFeeds noted that the route involves four separate systems, each introducing its own risks.
FinanceFeeds also reported that Ripple and Flare are both strategic investors in Sentora, the firm responsible for curating the vault. That relationship forms part of the broader institutional context surrounding the lending infrastructure.
Historical Debt Concentration Raises Additional Questions
Concentration among borrowers is another consideration for the market. In an earlier snapshot reported by KuCoin News, three addresses accounted for 93% of the pool's debt, when RLUSD loans totalled $7.2 million and were backed by 10.8 million wrapped XRP.
Current borrower concentration figures were not available in the reported information, so the earlier distribution should not be treated as a measure of the market's present conditions.
As the pool approaches full utilisation, its capacity to support additional loans will depend on incoming RLUSD liquidity and any changes to its supply cap. The market's future expansion will therefore hinge on both lender participation and the development of demand for borrowing against FXRP.
source: bsc.news
Writer: Ethan Collins
Crypto Journalist
Ethan Collins reports on developments across the cryptocurrency and blockchain sector. His work covers market movements, protocol updates, regulatory changes, and emerging trends in digital assets.
He focuses on presenting complex topics in a clear and accessible manner for a broad readership.
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