XRPL’s token escrow targets regulatory-friendly blockchain use

On Feb. 12, RippleX, Ripple’s development arm, announced that Token Escrow is now live on the XRP Ledger’s (XRPL) mainnet.

The change, labeled Token Escrow (XLS-85), extends conditional locking and release to trustline-based tokens (IOUs) and Multi-Purpose Tokens (MPTs).

This expands the network’s escrow function beyond XRP to cover issued assets used for stablecoins and tokenized instruments.

The upgrade lands as stablecoins continue to expand as crypto’s most established product line. CryptoSlate’s data show that the total circulating supply of these assets is hovering around $308 billion and continues to rise week over week.

At the same time, tokenized real-world assets are also scaling in parallel. Data from RWA.xyz show that tokenized US Treasuries are valued at roughly $10 billion on public chains, with tens of billions more across categories such as private credit and commodities.

For XRPL, that market context is the point. The new feature is less about adding another optional tool for developers and more about introducing an on-chain settlement primitive that institutions can use to move assets only after conditions are met.

Escrow expands beyond XRP, but issuers keep the controls

XRPL has supported escrow for years, but the feature historically applied only to XRP.

Token Escrow broadens that scope to issued tokens, which is where most institution-facing use cases sit.

On XRPL, stablecoins, tokenized Treasuries, and other tokenized instruments are generally not recognized as native coins. Instead, they are seen as issued assets.

XRPL documentation makes the issuer control model explicit. Token escrow is permissioned at the issuer and token levels and is not automatically available for every asset issued on the network.

For trustline tokens, issuers must enable an “Allow Trust Line Locking” flag before escrow can be used with that issuance. For MPTs, issuers must enable “Can Escrow” (and related flags) for an issuance to support escrow.

That design matters for regulated issuers, which often want policy hooks and control points embedded in the asset’s lifecycle.

It also means the adoption path is not automatic. A live amendment does not guarantee immediate volume if issuers do not opt in and if wallets and venues do not build user flows around it.

The feature is designed for workflows that require conditional settlement. In traditional finance, those conditions are handled through intermediaries, contracts, and operational processes.

On-chain settlement can compress those steps if the base ledger locks the value and releases it only when predefined rules are satisfied.

In practical terms, token-enabled escrow can support delivery-versus-payment settlement, time-locked distributions and structured payouts, over-the-counter trade settlement that reduces counterparty risk, and collateral and margin mechanics that require conditional release rather than immediate transfer.

Each of those workflows becomes easier to model when the escrow primitive can hold the same asset types institutions use in settlement, rather than forcing the process to route through XRP alone.

XRPL’s reserve model turns object growth into structural XRP demand

XRPL’s reserve model creates a second-order mechanism that can translate greater ledger usage into baseline XRP balances held for operational reasons, rather than for transaction fees.

On mainnet, accounts must hold a 1 XRP base reserve plus 0.2 XRP per owned ledger object (owner reserve). Those requirements were sharply lowered on Dec. 2, 2024, a change that made resource-intensive applications more feasible.

That matters because Token Escrow is an object-driven feature. Each escrow created on the ledger is an owned object. As escrow-based settlement workflows scale, they can increase the owner reserve requirements for the entities that own those objects.

A simple scenario range illustrates the mechanical relationship.

If Token Escrow adoption drives an additional 100,000 escrow objects, that implies an incremental 20,000 XRP in owner reserves (100,000 × 0.2). At 1,000,000 new escrow objects, the total XRP is 200,000. At 10,000,000, it is 2,000,000 XRP.

Those figures are not a forecast of adoption, and they are not a price call. However, they show how XRPL’s design links usage to reserve requirements.

For institutions, that reserve functions more like operational collateral than a fee and it remains because the system requires it to run resource-intensive workflows.

This is one reason XRPL developers focus on “plumbing” features.

In a reserve-based model, the unit economics of growth are tied to whether more meaningful objects exist on the ledger, not to whether transaction fees rise.

The bigger push is a permissioned stack, not a single amendment

Meanwhile, Token Escrow is being introduced alongside a broader set of changes that XRPL developers have framed as a “permissioned” toolkit, designed for regulated participation on a public ledger.

Permissioned Domains (XLS-80) were activated on mainnet earlier this month.

These domains are controlled environments that “do nothing on their own,” but enable other features, including permissioned decentralized exchanges and lending protocols, that can restrict access and support on-chain compliance.

RippleXDev noted on X that the Permissioned DEX had reached validator consensus to activate shortly after.

When viewed as a combined architecture, these features answer three distinct questions for institutional participants.

Permissioned Domains address who is allowed to participate in a transaction. Token Escrow addresses how assets settle conditionally and safely. Lastly, the Permissioned DEX addresses where compliant liquidity and price discovery occur.

This triad of features suggests a shift in the XRPL’s fundamental value proposition.

It is moving away from being viewed solely as a payments chain with a central limit order book and toward a role as an institutional settlement layer defined by gated participation, controlled venues, and native conditional settlement.

The premise is straightforward. Stablecoins and tokenized assets are scaling, and regulated entities often prefer not to interact with open pools where participant identity and access controls are undefined.

If the ledger can support gated participation and conditional settlement without relying entirely on external systems, it becomes easier to map real-world compliance and operations onto on-chain rails.

What comes next, and what could slow it down

The activation of Token Escrow represents a forward-looking bet that the future of blockchain lies in compliance-compatible stacks rather than purely permissionless systems.

The first pillar is regulated liquidity formation, where permissioned venues reduce the compliance friction that currently prevents many institutions from accessing open liquidity pools.

The second is the standardization of RWA settlement. With tokenized treasuries and other assets already scaling, conditional settlement primitives could make production workflows easier to ship.

The third pillar is expanding stablecoin utility beyond simple transfers. Escrow capabilities unlock structured settlement and treasury automation, use cases that resemble back-office operations more than active trading.

Significant implementation risks remain, as issuers must opt in to token escrow capabilities by enabling the required flags. At the same time, wallets and exchanges must integrate the new flows to make them accessible to users.

Additionally, the rise of permissioned domains carries the risk of fragmenting liquidity if the ecosystem splits too sharply between open and gated markets.