XRP Ledger Advances Privacy Layer for Bank Adoption

TLDR

• The XRP Ledger developer committee has proposed the Confidential MPT standard under XLS-0096 to support encrypted token transfers.
• The proposal builds on the existing XLS-33 framework while adding EC-ElGamal encryption and zero-knowledge proofs.
• The new standard hides individual balances and transaction amounts from public view.
• Validators can still verify that OutstandingAmount remains less than or equal to MaxAmount.
• The design preserves issuer controls, including freezing accounts and clawback functions.

The XRP Ledger (XRPL) developer committee has proposed a new token standard focused on transaction privacy. The proposal introduces Confidential MPTs under XLS-0096 to support encrypted balances and transfers. The update aims to meet banking privacy requirements while keeping compliance controls intact.

XRP Ledger Introduces Confidential MPT Standard

The XRP Ledger contributor Shawn Xie submitted XLS-0096 titled “Confidential Transfers for Multi-Purpose Tokens” on GitHub last week. The proposal adds encrypted balances and confidential transfers to the existing XLS-33 Multi-Purpose Token framework. It uses EC-ElGamal encryption and zero-knowledge proofs to protect transaction data.

XLS-33 currently allows flexible token issuance, yet it exposes all balances and transfers to public view. Therefore, the new standard keeps the existing accounting structure but encrypts individual balances and amounts. Xie wrote that transparency under XLS-33 has limited institutional use cases. He stated that Confidential MPTs “bring encrypted balances and confidential transfers without abandoning XLS-33 rules.”

The design ensures validators can still verify supply limits. It keeps the MaxAmount field to cap the total supply. It also requires OutstandingAmount to remain less than or equal to MaxAmount. However, the system enforces this rule without revealing private balances.

GitHub documentation outlines four core properties within the specification. The first property covers confidentiality through encrypted balances and hidden transfer amounts. XRPL validator Vet said the design prevents validators and observers from viewing individual holdings.

The second property maintains public auditability of the total supply. The system verifies OutstandingAmount compliance without decrypting confidential balances. As a result, validators can enforce supply rules transparently.

The third property introduces selective disclosure through view keys. The design supports a trust-minimised on-chain auditor model and an issuer-controlled disclosure model. The fourth property ensures compatibility between public and confidential balances for the same token.

Compliance Controls and Institutional Focus on the XRP Ledger

The proposal keeps issuer authority under the confidential framework. Issuers can freeze accounts and execute clawbacks when required. The system treats a designated issuer’s second account like any non-issuer holder.

OutstandingAmount continues to represent the total of all non-issuer balances. Therefore, issuers maintain supply control and reserve management. The design keeps XLS-33 issuance rules intact while adding privacy features.

The XRP Ledger introduced Permissioned Domains and Permissioned DEX last month. These tools allow institutions to operate within defined compliance environments. The developer community now focuses on privacy enhancements alongside these compliance updates.

Banks have avoided public blockchains because transaction data remains fully visible. The new standard seeks to address this conflict through encrypted token balances. However, the proposal applies only to issued tokens and excludes XRP.

At press time, developers continue discussing XLS-0096 on GitHub. The proposal has not reached the XRPL validator poll as an amendment. The committee has not set a timeline for further voting steps.

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