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Analyzing Ripple’s infrastructure through transfer, communication, and intelligence layers, this research reinterprets it as a Future Financial OS. It tracks the evolution of XRPL and ISO 20022 into data-driven intelligent finance, illuminating a blueprint for future financial systems.

1. From the Speed of Transfer to the Intelligence of Value
1.1 Redefining Value Transfer: Data-Centric Networks Beyond Speed
Over the past decade, one of the primary challenges the blockchain industry sought to solve was the reduction of remittance speed and costs. However, as of 2026, technology that merely moves assets quickly no longer provides a distinct competitive advantage. The value of a financial network is now determined by the density of data embedded within assets and the intelligence to interpret it, alongside the speed of the transfer itself. The definition of Value Transfer is being redefined from a simple balance update to a process that real-time processes and optimizes complex financial information coupled with transactions. This is the starting point of the intelligent value network that Ripple aims to build.
1.2 Universal Standardization of ISO 20022: Practical Implications of a Unified Financial Language
In November 2025, the global financial sector completed its transition to the ISO 20022 unified standard, leaving behind the era of SWIFT’s legacy messaging (MT). This was not merely a technical update of communication protocols; it signified the opening of a highway where high-density data can flow without borders by unifying fragmented global financial languages. ISO 20022 precisely captures the purpose of payment, ultimate beneficiary information, and detailed tax data in structured fields. This high-resolution data serves as the essential raw material for financial institutions to automate processes previously handled manually, such as Anti-Money Laundering (AML), foreign exchange management, and corporate treasury reconciliation. The financial market has now reached a new threshold, moving beyond simple compliance to focus on how to monetize and intelligentize this data.
1.3 The Emergence of a New Financial Operating System (OS) through Infrastructure Integration
This research analyzes Ripple’s strategic acquisitions and technical updates over the past few years through the lens of an organic system: a Financial Operating System (OS). Ripple’s trajectory can be interpreted as the process of completing the "intelligent layer" proposed in this research—overlaying the standard language of ISO 20022 onto the physical transmission rails of the XRP Ledger (XRPL) and securing data pipelines through acquisitions such as GTreasury. We aim to explore how this vertical integration strategy consolidates fragmented financial services into a single platform and reconfigures the backend of the institutional financial system, supported by concrete empirical cases and technical evidence.

2. Architecture of the Intelligent Value Network: The Three Core Layers
To possess intelligence, a value network must move beyond simply transferring assets to an architecture that understands the meaning of data and self-optimizes based on it. This chapter analyzes in detail how the three layers—Rails (Transfer), Language (Communication), and Brain (Intelligence)—interact to form the operating system of future finance.
2.1 Transfer Layer: The Physical Foundation for Guaranteed Real-time Settlement (XRP/XRPL)
The transfer layer is the hardware foundation at the base of the network responsible for the physical movement of value. In traditional correspondent banking systems, the movement of messages and capital was decoupled, leading to inherent settlement risks that required days to resolve.
The XRP Ledger (XRPL), as a transfer layer, provides an atomic settlement system that finalizes transactions within 3 to 5 seconds. This is not merely an improvement in speed; it signifies the maximization of capital efficiency, allowing financial institutions to cycle capital in real-time without stagnation.
Designed for institutional-grade demand, XRPL maintains low transaction costs and a throughput of thousands of transactions per second (TPS). It serves as a powerful engine ensuring frictionless value transfer while accommodating the massive data transactions generated by the subsequent communication and intelligence layers.
2.2 Communication Layer: The Universal Language of Finance via High-Resolution Data
The communication layer is the nervous system that provides context and meaning to the value being transferred. Regardless of how quickly value moves, intelligent finance is impossible if the underlying information is opaque. ISO 20022 plays a pivotal role in this layer by unifying fragmented financial languages.
While legacy message formats were primarily unstructured text, ISO 20022 structures data through sophisticated models consisting of Business, Logical, and Physical layers. Detailed information such as sender/receiver addresses, purpose codes, and tax data are contained in standardized fields, essentially eliminating data mapping errors between systems and maximizing interoperability.
The core of ISO 20022 lies in its rich metadata, such as purpose codes. Through this standard, payment messages evolve from simple instructions into high-resolution information clusters. This provides financial institutions with high-quality raw material to automate AML, FX compliance, and corporate treasury reconciliation—a prerequisite for the intelligence layer to derive insights.
2.3 Intelligence Layer: Data-Driven Decision Making and Proactive Governance
The intelligence layer is the brain of the network, analyzing high-density data collected from the lower layers to derive real-time insights and facilitate decision-making. No matter how fast value moves or how standardized the language is, it cannot be a true financial operating system (OS) without the intelligence to interpret and optimize information. The potential disruptive impact of Ripple’s infrastructure, as viewed through this architectural lens, will be manifested by seamlessly coupling its data pipelines with the intelligence layer.
2.3.1 Project Keystone and the Medallion Architecture
Project Keystone, a joint initiative by the Bank for International Settlements (BIS) and the Bank of England, demonstrates the standard model for how this intelligence layer should operate. Keystone adopts a Medallion data architecture to effectively process the vast data extracted from ISO 20022 messages, maximizing data value through three stages:
Bronze (Raw): The foundational stage where raw ISO 20022 messages from the XRP Ledger (XRPL) are collected and stored.Silver (Parsed): A refinement stage where complex messages are separated into analyzable units, normalized, and structured to establish connectivity between data points.Gold (Aggregated): The final analytical stage where high-dimensional indicators are calculated and visualized based on refined real-time data to create datasets for immediate decision-making.
2.3.2 Synergy of the Four Key Analytical Modules
Refined "Gold-level" data creates powerful business synergies through the four key analytical modules within the intelligence layer:
Liquidity Monitoring: Real-time visualization of fund flows and network connectivity across the entire system. This enables the proactive detection of liquidity bottlenecks at specific points and the active reallocation of funds based on analysis to prevent system congestion.Economic Monitoring (Nowcasting): Analysis of consumption purpose data embedded in payment messages. This allows for the real-time prediction (nowcasting) of macroeconomic indicators like GDP or inflation, often well ahead of official statistics released by government agencies.Messaging Compliance Analysis: Constant monitoring of transmitted data for compliance with international standards. By maintaining message quality and pre-analyzing errors, it minimizes transaction rejection rates and ensures network reliability.Anomaly Detection: Performing precise pattern analysis based on high-density data. It identifies anomalies such as fraud, unauthorized transactions, and money laundering in real-time to prevent financial accidents.
Ultimately, the intelligence layer is the core mechanism through which financial institutions move beyond passively reacting to market trends to realizing Intelligent Governance—managing and optimizing the entire system in real-time based on data. This allows institutions to evolve from mere observers of asset flows into active economic agents capable of identifying consumption trends in the real economy and reflecting them immediately in policy.

3. Ripple’s Vertical Integration Strategy: From Blueprint to Infrastructure Completion
Ripple’s recent activities appear not as a fragmented expansion of services, but as a sophisticated process of Vertical Integration aimed at materializing the blueprint for an intelligent value network. This trajectory can be highlighted as a process of completing the puzzle for a next-generation financial OS by internalizing the entire financial process, from the technical foundation to institutional touchpoints and liquidity supply chains.
3.1 [Stage 1] Establishing Core Protocols: Convergence of Speed and Data
The first step in building the infrastructure was to align the physical laws of value movement with the protocols of communication at the ledger level.
XRPL’s Technical Execution Power: The XRP Ledger (XRPL) provides the technical basis for real-time financial execution through instant finality, confirming transactions within 3 to 5 seconds. Beyond mere speed, this ensures execution integrity, where the results of subsequent data analysis lead to the actual movement of capital without delay.Native Integration of ISO 20022: XRPL secured compatibility with the ISO 20022 standard at the ledger level. The core lies in the processing of high-density data. Utilizing XRPL’s Memos field (up to 1KB), complex messages such as pacs.008 (customer credit transfer) are encoded in hex and stored. This establishes a high-resolution environment where in-depth information, such as purpose codes, is transmitted in real-time alongside the transaction.Native Lending Protocol: Lending logic implemented directly on the ledger provides a foundational metabolic function that allows assets to flow autonomously without external middleware. This serves as the algorithmic basis for automatically rebalancing liquidity within the network based on analysis from the intelligence layer.
3.2 [Stage 2] Infrastructure Expansion: Securing Trust-Based Connectivity
Building upon the core protocols, Ripple established the "outer walls of trust" and value carriers that allow institutional finance to enter the space with confidence.
$RLUSD, the Epitome of Institutionalized Trust: $RLUSD is more than just a price-stable asset; it is the epitome of institutionalized trust, implementing legal bankruptcy-remoteness through a NYDFS-authorized Limited Purpose Trust. It functions as a currency issued and managed by the Ripple National Trust Bank (RNTB) under the supervision of the OCC, acting as a value carrier based on federal-level guarantees rather than corporate credit.Security Internalization via Metaco & Palisade: The acquisitions of Metaco and Palisade were the process of equipping the network with a "firm skin" of institutional-grade security. By vertically aligning custody and wallet technologies, Ripple designed a system where the entire process, from asset storage to transfer, is controlled within its integrated security framework.Rail, Interoperability with Legacy Systems: Rail, a stablecoin-based payment platform, manages the interconnecting infrastructure between existing financial networks and the XRPL. It serves as an interface that seamlessly transitions data from traditional financial systems into the on-chain economy.
3.3 [Stage 3] Integration of Liquidity and Data Pipelines
The final stage was to equip the system with the core engine that supplies liquidity to the entire network and injects necessary data into the intelligence layer in real-time.
Ripple Prime (Hidden Road), the Heart of Liquidity: Ripple acquired the global prime broker Hidden Road and reorganized it into Ripple Prime. This is the first instance in the crypto industry of internalizing clearing, settlement, and financing functions. When the intelligence layer detects a point of liquidity shortage, Ripple Prime immediately pumps capital to maximize capital efficiency across the entire network.GTreasury & Solvexia, Completing the Data Engine: The $1 billion acquisition of GTreasury was a move to secure the raw materials for the intelligent OS. Specifically, the automation engine of its subsidiary, Solvexia, automates corporate financial data reconciliation, which was previously performed manually. As real-economy data from global corporations flows into the intelligence layer in ISO 20022 format through this engine, the data pipeline required for a "thinking" financial OS is finally complete.

4. Integrated Synergy: Demonstrating Data-Driven Real-time Decision Making
The vertical integration of Ripple’s infrastructure—encompassing the Transfer, Communication, and Intelligence layers—manifests as intelligent financial services that go beyond simple efficiency improvements to optimize capital flows in real-time. This chapter explores its empirical value through two lenses: global corporate capital optimization and macroeconomic governance.
4.1 Global Corporate Capital Optimization: An Integrated Workflow from Prediction to Execution
The greatest challenge for a multinational corporation’s treasurer is identifying the liquidity of fragmented overseas branches in real-time and deploying it to the right place. Ripple’s intelligent value network addresses this through an automated loop: Input – Analysis – Action – Feedback.
(Input) Real-time Data Capture: A global corporation collects real-time balance data from worldwide bank accounts and XRPL nodes using GTreasury and the Solvexia engine. All transaction information is generated as high-density data in ISO 20022 format, and Solvexia’s matching algorithm automatically reconciles internal ERP ledgers with external transaction history with an accuracy rate exceeding 99%.(Analysis) Intelligent Bottleneck Detection: The intelligence layer, based on Project Keystone, analyzes the collected "Gold-level" data. The system derives real-time insights, such as: "Liquidity in the European branch is insufficient for tomorrow’s settlement, and current Repo rates in the US market are most favorable for financing." This process proactively detects future liquidity crises based on historical cash flow data.(Action) Immediate Execution and Settlement: Once the analysis is complete, the system immediately raises funds in the US market via Ripple Prime (formerly Hidden Road) and converts them into RLUSD. The funds are transferred to the European branch within 3 to 5 seconds over XRP Rails. During this process, ISO 20022 pacs.008 messages are encoded into XRPL’s Memos field, ensuring that the purpose code and sender information accompany the funds without loss.(Feedback) Automated Post-trade Reporting: Upon completion of the transfer, Solvexia automatically records the transaction results in the ERP. Furthermore, in accordance with the enhanced regulatory guidelines of 2026, such as the GENIUS Act or MiCA 2.0, the system automatically generates real-time Proof of Reserves (PoR) and transparency reports, transmitting them via API to regulatory authorities to close the loop.
4.2 Innovation in Macroeconomic Governance: RLUSD Cards and Real-time Economic Indicators
Data generated in the retail sector also serves as a core raw material for the intelligent network. The RLUSD credit card, issued in collaboration with Mastercard, acts as more than a simple payment tool; it functions as a decentralized sensor collecting real-economy indicators.
Traditional economic indicators (GDP, inflation, etc.) are lagging indicators, often published months after an event occurs following a centralized statistical aggregation process. However, every payment made via the RLUSD card includes detailed Purpose Codes—such as salary, rent, or consumer goods—through the standard language of ISO 20022.
The economic monitoring module of Project Keystone aggregates this fragmented individual consumption data in real-time to calculate Nowcasting indicators. For instance, central banks can sense shifts in food consumption patterns or spikes in fuel payment frequency in specific regions in real-time. This provides the foundation for Proactive Governance, enabling governments and financial institutions to establish precision monetary policies based on data and respond immediately to market volatility.

5. Ripple, Architecting the Future Financial Operating System
Ripple is evolving into an intelligent operating system (OS) that dominates the backend of global financial infrastructure. As of 2026, the vertically integrated stack built by Ripple has fundamentally changed how institutional finance adopts digital assets.
5.1 Evolution toward Intelligent Governance
While blockchains of the past were merely passive rails for moving money, Ripple’s intelligent value network has evolved into an active governance system that interprets data and optimizes fund flows autonomously. The intelligence layer, implemented through Project Keystone, monitors liquidity within the network in real-time and reallocates capital autonomously as needed.
This intelligent governance provides financial institutions with unprecedented control. The ability to identify where capital is stagnating and where real-economy demand is shifting—and to execute based on that data—means that asset managers no longer rely on intuition. Instead, they can manage risk and maximize returns based on precise, data-driven analysis.
5.2 Full Integration with Institutional Finance: A New Threshold of Growth
Ripple has achieved full integration with institutional finance by utilizing regulation as a competitive advantage rather than a barrier. Investor protection mechanisms, such as the custody of RLUSD reserve assets via BNY Mellon and the Limited Purpose Trust structure, have removed the psychological and legal barriers institutions faced when adopting digital asset infrastructure. Ripple has thus solidified its position as a currency infrastructure protected by institutional statutes.
In particular, the native internalization of ISO 20022—the global standard language—at the ledger level has become a new threshold for growth. XRPL now functions as an essential infrastructure for institutional finance, communicating in real-time with global settlement networks (such as TIPS) and exchanging high-resolution data. This has drastically lowered compliance costs while serving as a catalyst for massive institutional capital to flow into the on-chain economy.
5.3 Future Financial Competitive Advantage Redefined by the Intelligent Value Network
Ultimately, the competitiveness of future finance depends on who can process more data more intelligently. Ripple’s capabilities in transfer (XRP/XRPL) and communication (ISO 20022), combined with its strategic acquisitions, provide the most powerful answer to this question when coupled with the intelligent analytical framework proposed in this research.
On an intelligent value network, financial institutions possess an integrated workflow where they analyze as they transfer and execute policy as they analyze. This not only maximizes capital efficiency but also enables agile decision-making based on real-time economic indicators (Nowcasting), providing an overwhelming advantage. Ripple stands as a core architect of the future financial system where data and value converge, materializing its boundless potential.

Key Source
BIS(2024.09.26) - Project Keystone: Unlocking data analytics for ISO 20022 payments
SWIFT(2022.12.01) - ISO 20022 for Dummies, 6th Limited Edition
ISO(2022.01.01) - Introduction to ISO 20022: Universal financial industry message scheme
Electronic Payments International(2026.02.17) - ISO20022 migration: a new frontier of opportunity
GFT Technologies(2025.11.01) - Going Beyond Payments Compliance: How to unlock the full potential of ISO 20022 in the evolving paytech ecosystem
Hacken(2025.11.13) - ISO 20022 And Why Crypto Should Care
GTreasury(2025.11.20) - How Treasurers and CFOs Can Prepare for the Shift to ISO 20022
Ripple(2025.12.04) - Building the One-Stop Shop for Digital Asset Infrastructure
Ripple(2025.10.24) - It’s Prime Time: Ripple Closes Hidden Road Acquisition to Bring Prime Brokerage into the Digital Age
CoinDesk(2025.11.05) - Ripple’s RLUSD to Power Mastercard Credit Card Settlements on XRP Ledger
Fintech Finance News(2025.11.05) - Ripple teams up with Mastercard, WebBank and Gemini to bring stablecoin settlement with RLUSD to improve fiat payments
Yahoo Finance(2026.02.19) - XRPL lending protocol could attract $100B in institutional capital
The Crypto Basic(2026.02.19) - Ripple CEO Says Strategic Acquisitions Are Strengthening XRP

Disclaimer
The contents of this report are for informational purposes only and do not constitute a recommendation or basis for legal, business, investment, or tax advice under any circumstances. References to specific assets or securities are for informational purposes only and do not represent an offer, solicitation, or recommendation to invest. The final responsibility for any investment decisions lies solely with the investor, and this report should not be used as a guideline for accounting or legal judgment.
As a matter of principle, the author does not trade related assets using material non-public information obtained during the research or drafting process. The author and Catalyze may have financial interests in the assets or tokens discussed herein and may serve as a strategic partner to certain networks.
The opinions and analyses expressed in this report reflect the author's personal views and do not necessarily represent the official position of Catalyze or its affiliates. All information is current as of the date of publication and is subject to change without prior notice.

Squid’s CORAL replaces AMM slippage with intent-based RFQs—delivering firm quotes, predictable execution, and policy-ready fees for cross-chain payments and institutional flows.

1. Introduction: The Evolution of Cross-Chain Swap Architectures and the Core Problem
Public blockchain ecosystems are being reshaped into a multi-chain environment where L1s, L2s, rollups, and appchains coexist. Users increasingly hold and exchange assets assuming cross-chain movement, and service providers have also normalized operating chain-specific infrastructure. As a result, liquidity and user experience become fragmented by chain, and as execution steps increase, cost, latency, and failure points expand in tandem.
Cross-chain swaps emerged to mitigate these issues. However, as adoption expands from trading into payments, commerce, and institutional use cases, the structural limits of the widely adopted AMM (liquidity pool)-based model are becoming increasingly clear.
1.1 Structural Limitations Facing AMM-Based Cross-Chain Swaps

AMM-based cross-chain swaps operate on the assumption that liquidity is pre-positioned on the destination chain. To deliver the same swap experience across multiple chains, liquidity pools must be maintained per chain, and that liquidity continuously shifts based on incentive design and market volatility. AMMs do not resolve liquidity fragmentation; instead, they increase the operational burden of managing chain-by-chain liquidity.
This burden translates into slippage—the gap between the expected price and the executed price. In AMMs, prices are not fixed quotes; they are determined by the pool’s reserve state, and the trade itself changes the pool balance and moves the price. As trade size increases, price impact compounds, and the average execution price drifts further away from the user’s expected exchange rate.
In cross-chain settings, execution delays are introduced between chains. The larger the gap between the quote time and the execution time, the more slippage can increase or become difficult to predict. If slippage exceeds the user’s tolerance, the transaction fails (reverts), which becomes a direct user-experience risk.
In short, AMM-based cross-chain swaps have the following structural limitations:
Dependence on destination-chain liquiditySlippage transmission driven by liquidity volatilityIncreased price impact and execution-failure risk for large trades
These limitations make it structurally difficult to meet the execution requirements demanded in payments, institutional, and commercial use cases.
1.2 Differences in Requirements: Trading Swaps vs. Payment/Commercial Swaps
The limitations of AMM-based structures stem from the fact that execution requirements differ by transaction intent. In trading-centric swaps, price volatility and execution risk are assumed; users manage these risks by setting slippage tolerance, splitting execution, and so on.
In contrast, payment and commercial swaps prioritize predictability of outcomes. The essence of a payment is “how much arrives if I pay X,” which directly ties into invoicing, settlement, accounting, and customer support. In this environment, slippage is not merely a cost fluctuation—it functions as an operational risk.
Therefore, in payments and commerce, price finality tends to matter more than best execution price; eliminating slippage (or making it highly predictable), and ensuring fee stability and controllability become primary conditions. In particular, fees are close to “market costs” in trading, but in commerce they must be designed as policy variables.
However, in AMM-based cross-chain swaps, exogenous factors—chain gas, liquidity conditions, routing paths, network congestion—combine and cause total costs to fluctuate continuously. Even if a service provider designs a policy-based fee model, it is structurally difficult to control realized execution costs.
As a result, AMM-based cross-chain swaps may be effective for trading, but structural mismatches grow as they expand into payments, institutional, and commercial use cases.

2. Structural Limitations of AMM-Based Cross-Chain Swaps
2.1 Characteristics of the Permissionless Liquidity Model
An AMM is a mechanism that forms prices via liquidity pools without an order book. Anyone can provide liquidity, and traders swap directly against the pool. In this structure, execution quality is strongly dependent on pool depth and asset distribution.
In order-book markets, external quotes exist. In AMMs, the pool state itself is the price. At the moment a trade occurs, the price is simultaneously re-formed; execution and price formation are coupled within the same mechanism. This property is advantageous for automated trading, but becomes a structural constraint in payment and commercial environments that require control over final received amounts.
2.2 Structural Causes of Liquidity Volatility and Slippage

AMM prices are determined by the ratio of two assets deposited in the pool. A representative AMM is designed to preserve x × y = k, so when a trade happens, reserve ratios shift immediately and the price moves. Slippage is therefore not an exception—it is a structural outcome.
Slippage is influenced by pool liquidity size and trade volume. As trade size grows, the magnitude of price movement increases, and because of the curved pricing function, the average execution price becomes progressively worse relative to the user’s expected price as the trade proceeds. As market volatility increases, the gap between external market prices and the price formed in the pool widens further.
2.3 Lack of Price Finality and Limits for Large Trades
In AMMs, the impact of the price curve grows quickly as trade size increases. Small trades see limited price movement, but as volume grows, the same incremental trade causes a much larger price change than before. As a result, the average execution price deviates significantly from the user’s expected price.
While splitting execution or setting slippage limits can mitigate this, in cross-chain environments, additional delays and route complexity increase failure risk. Ultimately, for large trades, it becomes difficult to predict both price conditions and execution success at the same time.
2.4 Constraints on Fee and Business-Policy Design
In commercial environments, fees should function as policy variables. However, in AMM-based swaps, total cost is dependent on pool structure and market conditions. When cross-chain execution is combined, gas and execution costs accumulate and the cost structure becomes more complex.
Even for the same swap request, costs vary by timing and network state, making fixed fees or policy-based fees difficult to design and maintain. In payment and commercial settings, this volatility directly increases settlement complexity and customer-support burden.
2.5 Structural Mismatch for Payment, Institutional, and Commercial Use Cases
In payment, institutional, and commercial swaps, finality conditions matter more than best price. Variability in received amount, price impact during large executions, and cost fluctuations driven by exogenous variables make invoicing, settlement, and accounting unstable.
From this perspective, AMM-based cross-chain swaps structurally embed slippage and price impact, and cross-chain settings add execution delays and multi-step cost structures. Accordingly, payment and institutional use cases derive the following requirements:
Firm quote (price finality)Slippage elimination or predictabilityFee stability and controllabilityTrust in the execution structure
These requirements explain why RFQ and intent-based execution models—covered in the next section—are gaining traction.

3. Cross-Chain Execution Requirements from the Payment and Institutional Perspective
In payment, institutional, and commercial use cases, cross-chain swaps must operate not merely as an asset exchange function, but as execution infrastructure where price, conditions, and outcomes are defined in advance and executed reliably. The core requirements are predictability of results and trustworthiness of execution. From this perspective, AMM-based models face constraints in meeting these requirements.
The requirements can be summarized into four key conditions.
3.1 The Need for Firm Quotes (Pre-Execution Finality)
In payment and institutional environments, the result must be finalized before execution. The essence of payment is “how much arrives if I pay X,” which directly connects to invoicing, settlement, and accounting. Therefore, payment and commercial swaps require a firm quote structure where received amount and conditions are clearly agreed upon at the quoting stage.
In AMM-based swaps, quotes are derived from pool state and assume that execution outcomes may change during execution. This creates a potential gap between quote and fill, leading to settlement mismatches and operational risk in payment and institutional environments. As a result, in these use cases, pre-agreed final conditions take priority over real-time market price.
3.2 Slippage Elimination or Predictability (Execution Stability)
Even if a price is finalized in advance, risk remains if execution outcomes fluctuate during execution. Slippage refers to the divergence between expected and actual outcomes due to changes in external liquidity conditions or market volatility, which can trigger downstream costs such as payment mismatches, refunds, and additional reconciliation.
Therefore, from a payment and institutional standpoint, slippage must be structurally eliminated, or at minimum bounded within a precisely predictable range prior to execution. Any structure where outcomes vary depending on network state or liquidity changes is unsuitable for commercial operations. Simply widening slippage tolerance may reduce failures, but it weakens finality and consistency of outcomes, making it an insufficient solution.
3.3 Fee Policy Stability and Controllability (Policy Control)
In payment and commerce, fees are not merely execution costs; they are components of service policy. Fees are intentionally adjusted based on promotions, customer tiers, channel strategy, and settlement structure, and must remain predictable at the time of transaction. Fee consistency directly impacts user trust and also ties into reconciliation, accounting, and operational efficiency.
However, in AMM-based cross-chain swaps, total cost is determined by multiple exogenous variables such as chain gas, liquidity conditions, execution routes, and network congestion. Thus, even if a provider sets a policy-based fee, realized execution cost inevitably changes by transaction timing. In payment and institutional settings, this volatility increases reconciliation complexity and operational burden, constraining the ability to use fees as policy variables.
3.4 Trust Requirements for the Execution Structure (Clear Accountability and Attribution)
In payment and institutional use cases, it is not only the outcome that matters but also how the transaction is executed—under what conditions and rules. The mechanism for validating execution conditions, criteria for success and failure, and the attribution and handling of funds in failure scenarios must be defined in advance. This is a trust requirement for operational and risk-management purposes, beyond technical stability alone.
In cross-chain environments, as execution steps increase, failure points multiply. If a transaction halts mid-process or becomes ambiguous, payment and institutional environments cannot accept it. Therefore, the structure must clearly define pre-execution condition verification, fund movements based on execution outcome, refund behavior on failure, and accountable parties.

4. Squid CORAL Overview: An Intent-Based RFQ Execution Layer

Squid CORAL is a protocol that frames cross-chain swaps not as a simple exchange function, but as an execution layer that executes trades based on pre-defined conditions. Instead of AMM-based price discovery, CORAL adopts a structure that first finalizes price and conditions based on user intent, then executes accordingly.
To achieve this, CORAL uses an RFQ (Request-for-Quote) execution model. Users specify the asset to exchange, source and destination chains, and trade conditions, while market participants provide quotes that satisfy those conditions. Conditions are finalized before execution, and execution follows the pre-agreed terms.
This design is intended to satisfy the requirements of payment and institutional environments: price finality, execution stability, fee-policy controllability, and trust in execution.
4.1 RFQ-Based Price Finalization
In CORAL, prices are not calculated from liquidity pool states. Multiple market participants submit quotes for a user’s trade intent, and the price is determined via an RFQ process where a qualifying quote is selected. The price is finalized before execution and does not change during execution.
In this structure, price volatility risk is not passed to the user. The quoting participant assumes price risk, and the user receives outcomes according to pre-agreed terms. This differs from AMM-based models where quote/execution divergence, slippage tolerance settings, and execution failure risk are inherent.
Through RFQ-based execution, Squid CORAL presents a cross-chain swap model that satisfies the payment and institutional requirement of finalized execution outcomes.
4.2 Pre-Agreement on Trade Size and Conditions

In CORAL, execution conditions—trade amount, output asset, destination chain, recipient address—are defined and agreed upon in advance. Unlike AMMs, where large trades are affected by price curves, CORAL incorporates trade size directly into the RFQ process and treats it as part of execution conditions.
As a result, large trades do not require compensating mechanisms such as split execution or slippage limits. Conditions are finalized prior to execution, and execution applies those conditions as-is. This makes CORAL suitable for use cases requiring consistent outcomes: large payments, institutional transfers, and commercial settlement.
In effect, CORAL enables predictable and controllable cross-chain execution by allowing trade size and conditions to be agreed upon before execution.
4.3 Slippage Elimination and Fee-Policy Design
CORAL is designed to keep outcomes predictable without slippage. Because price and conditions are finalized before execution, external liquidity changes or market volatility do not affect outcomes during execution. Slippage is therefore not a separate parameter to manage—it is eliminated at the level of execution design.
Fees are also not determined indirectly by liquidity conditions or congestion. Transaction costs are either included in the quoted price or explicitly specified during the RFQ stage, enabling service providers to design policy-based fees. Fee adjustments for promotions, customer tiers, and channel strategies are not undermined by execution-cost volatility.
Squid CORAL presents a cross-chain swap model that satisfies the requirement of finalized execution outcomes in payment and institutional environments through RFQ-based execution.

5. Conclusion: Payment and Institutional Demand Is Redefining the Standard for Cross-Chain Swaps

5.1 Summary of the Applicability Limits of AMM-Centric Cross-Chain Swaps
As discussed, AMM-based cross-chain swaps have served as an efficient baseline solution in trading-centric environments. However, as multi-chain ecosystems expand and cross-chain swaps extend into payment, institutional, and commercial use cases, their limitations become clearer.
AMMs depend on destination-chain liquidity, and that volatility transmits into slippage and price impact. As trade size grows, dispersion of outcomes increases, and cross-chain delays and complex cost structures further weaken predictability. In addition, because total cost is driven by exogenous variables—gas, liquidity state, network congestion—structural constraints emerge in designing and maintaining fees as policy variables.
These limitations are not simply about whether AMMs are “better” or “worse,” but are best interpreted as a fit problem between AMM execution properties and the requirements of payment and institutional environments. In these environments, outcome finality, execution stability, and cost controllability take priority—areas that AMM-based cross-chain swaps are structurally unable to satisfy.
5.2 The Execution-Model Shift Proposed by CORAL
Squid CORAL defines cross-chain swaps as an execution model that enforces pre-defined trade conditions. Through an RFQ and intent-based model, each trade becomes an execution unit that must satisfy user intent and conditions.
In CORAL, price, trade size, output asset, and execution conditions are agreed upon before execution, and execution applies those conditions as-is. Slippage and outcome variability are designed not to occur structurally. In addition, costs are explicitly presented during quoting, minimizing divergence between policy-based fees and realized execution costs.
As a result, CORAL satisfies the four key requirements of payment and institutional environments—firm quotes, execution stability, fee controllability, and a clear execution structure with explicit accountability—within a single coherent model.
5.3 Squid CORAL Positioning and Strategic Implications
Squid CORAL implements a cross-chain execution layer that meets the execution requirements of payment and institutional environments. CORAL’s core value is not merely providing an exchange function, but serving as execution infrastructure that consistently links trade conditions to execution outcomes.
By designing user experience such that execution volatility does not directly surface to end users, CORAL provides a foundation for service providers to design transaction conditions and fees as policy variables. Cross-chain swaps are treated as settlement-ready transaction units, and the execution process consistently reflects the agreed conditions.
In summary, the standard for cross-chain swaps is shifting toward execution structures that can reliably execute condition-finalized trades. Squid CORAL represents an implementation of this shift—providing a reference point for extending cross-chain swaps into execution infrastructure that can operate in payment, institutional, and commercial environments.

Key References
Squid Overview - CORAL
Squid Docs - Coral: Intent Swaps
Squid's Cross-Chain Order Routing and Auction Layer: CORAL
Other References
Squid Launches Cross-Chain Order Routing and Auction Layer (CORAL) to Enable Faster, Cheaper, More Reliable Access to Anything in Crypto
What is an Automated Market Maker? | Uniswap Labs
Understanding Automated Market-Makers, Part 1: Price Impact - Paradigm

Disclaimer
The contents of this report are for informational purposes only and do not constitute a recommendation or basis for legal, business, investment, or tax advice under any circumstances. References to specific assets or securities are for informational purposes only and do not represent an offer, solicitation, or recommendation to invest. The final responsibility for any investment decisions lies solely with the investor, and this report should not be used as a guideline for accounting or legal judgment.
As a matter of principle, the author does not trade related assets using material non-public information obtained during the research or drafting process. The author and Catalyze may have financial interests in the assets or tokens discussed herein and may serve as a strategic partner to certain networks.
The opinions and analyses expressed in this report reflect the author's personal views and do not necessarily represent the official position of Catalyze or its affiliates. All information is current as of the date of publication and is subject to change without prior notice.

South Korea is on the verge of a major transformation in its capital market following the passage of the STO (Security Token Offering) legislation. This article provides an in-depth analysis of the Korean STO market from technical and structural perspectives, examines the current KSD model to discuss the inevitability of interoperability technology, and presents a direction for the globalization of domestic assets.

1. Introduction: A Revolution in Financial Capital Markets Brought by STO Legislation
On January 15, 2026, the South Korean capital market reached a historic inflection point. Following years of deliberation and anticipation, the amendments to the Electronic Securities Act and the Capital Markets Act finally passed the National Assembly’s plenary session. This marks the official entry of Security Token Offerings (STO) into the regulated financial system. Beyond the mere debut of a new investment product, this legislation signifies a momentous shift where the capital market adopts Distributed Ledger Technology (DLT) as core infrastructure and embraces a diverse array of non-traditional assets that were previously difficult to securitize.
The amended laws are scheduled for full implementation in January 2027, following a one-year grace period after promulgation. For financial institutions and fintech companies, the remaining year represents a "golden time" to refine business models and establish optimal system infrastructures. Strategic choices made during this period will determine market leadership in the digital asset space for decades to come.

2. Asset Innovation vs. Infrastructure Disconnection: Why the Korean STO Market Chose "Siloed Survival"
However, it is premature to celebrate. While the regulatory gates have opened, the pathways through which assets and capital flow remain obstructed by technical silos and fragmentation. The technological barriers erected by individual institutions are becoming massive dams that hinder liquidity. This section analyzes how the very freedom of issuance and distribution granted by legislation has paradoxically led to market fragmentation and examines the resulting structural limitations.
2.1 Legislative Passage: Freedom of Issuance and Distribution
The crux of the amendments to these two major acts lies in the official recognition of Distributed Ledger Technology (DLT) as a legal electronic registration ledger. Previously, securities were recognized only when recorded on the central servers of the Korea Securities Depository (KSD). Now, records of rights changes inscribed on a distributed ledger carry the same legal presumption of rights as traditional electronic securities.

The shift is anchored by two main pillars:
First, Freedom of Issuance: The amendment to the Electronic Securities Act established the Issuer Account Management Institution system. Qualified issuers can now issue security tokens directly and manage records of rights changes on their own distributed ledgers without going through traditional brokerage firms. This enables fractional investment providers and related enterprises to lower fundraising costs by operating their own blockchain nodes.Second, Freedom of Distribution: Through the amendment of the Capital Markets Act, distribution regulations for non-standardized securities—such as Investment Contract Securities and non-monetary trust beneficiary certificates—have been overhauled. Notably, the creation of the OTC Trading Brokerage license allows for multi-party bilateral trading of security tokens in over-the-counter markets rather than just on formal exchanges. This provides the legal basis for various assets, including artwork, cattle, and music copyrights, to be tokenized and traded.
2.2 The Emergence of Issuer Account Management Institutions
The problem originates here. While the law allows qualified issuers to build independent distributed ledgers to ensure technical autonomy, it has inadvertently caused fragmentation. Given the legal liabilities issuers must bear in the event of hacking or system failure, it became a highly rational choice for them to build controllable, proprietary infrastructures rather than depending on third-party platforms.

2.2.1 The Issuance Market: Deeply Rooted Fragmentation
The period of legislative delay was a time of accelerated technical fragmentation. To preoccupy market leadership, companies formed alliances with partners sharing similar interests and pre-emptively built infrastructures. This preparation for institutional entry resulted in the proliferation of incompatible silos. As early as 2024, major securities firms moved beyond simple Memorandums of Understanding (MOUs) to build substantial proprietary systems for independent survival.
Shinhan Securities and SK Securities moved beyond simple cooperation to launch PULSE, a blockchain infrastructure project specialized for the financial sector, alongside Blockchain Global in 2024. This was a declaration of an independent path to preoccupy technical standards by creating a separate mainnet ecosystem.The market split into two distinct factions: individual heavyweights and the Koscom Alliance. Led by Kiwoom Securities, Koscom partnered with eight firms—including Meritz, Daishin, Yuanta, BNK, DB, IBK, and iM Securities—to develop a joint platform and lead a standardized ecosystem. However, ultra-large firms with massive capital, such as Mirae Asset, Korea Investment, NH, and KB, completed their own systems and chose not to participate in the Koscom joint network, further solidifying their own silos.Mirae Asset Securities, through the Next Finance Initiative (NFI) formed with SK Telecom and Hana Financial Group, completed joint infrastructure construction and system integration tests in 2024. They completed a massive, independent single network that does not mix with other alliances, waiting only for the law to take effect.Ecosystems centered on distribution channels and content also solidified independently. Korea Investment Securities verified the technical integrity of "Korea Investment ST Friends" after completing system integration tests with KakaoBank and Toss Bank in 2024. NH Investment Securities also strengthened its proprietary closed ecosystem through the STO Vision Group, conducting Proof of Concept (PoC) tests with fractional investment firms throughout 2024.
Major players are now ready to become Issuer Account Management Institutions based on different tech stacks and blockchains. Because the law granted ledger management authority to issuers, each firm chose to build optimized systems to clarify liability and maximize efficiency for their specific products.
2.2.2 The Distribution Market: Prelude to a Three-Way Race
has further intensified. According to the Financial Services Commission (FSC) announcement in October 2025, three major camps are competing for preliminary licenses for Security Token OTC Exchanges (Distribution Platforms):
KDX: An alliance led by Kiwoom Securities, Kyobo Life Insurance, and KakaoPay Securities.NXT Consortium: An alliance centered on Nextrade and Shinhan Securities.Lucent Block: A startup-led camp that attracted investments from firms like Hana Securities.

This reflects the financial authorities' institutionalization of the principled separation between issuance and distribution to prevent conflicts of interest, and they are currently aiming to grant preliminary licenses from the Financial Services Commission (FSC) to two entities. That is, the distribution market will also be divided into a structure where multiple exchanges compete rather than being centralized into a single exchange.
Ultimately, the market is diverging into numerous incompatible private chains. While the law defines a distributed ledger as a ledger jointly managed and recorded by multiple participants, the reality is a collection of disconnected silos built for administrative efficiency and security by individual institutions.

3. Structural Inevitability: The Dilemma of Multiple Ledgers Born of Non-Standardization
To grasp the essence of the structural changes brought by STO legislation, it is necessary to closely contrast the system with the traditional capital market infrastructure we are familiar with—the stock market. The current technical fragmentation is not merely a temporary phenomenon occurring during the implementation phase; rather, it is a structural consequence arising from the fundamental difference between existing centralized systems and the technological goals of security tokens.
3.1 Single Ledger Efficiency vs. Multi-Ledger Fragmentation
In the traditional stock market, moving Samsung Electronics shares from Brokerage A to Brokerage B (inter-firm transfer) is remarkably simple. In the KRX (Korea Exchange) market, the delivery of securities is carried out through the book-entry transfer method at the Korea Securities Depository (KSD), while cash payments are processed through settlement banks. The reason these "inter-firm transfers" are processed almost in real-time is that the system only needs to change the owner's "tag" on a single, massive central server maintained by the KSD. Legally, this is known as a "Book-entry Transfer." This overwhelming efficiency is made possible because all players share a single, unified ledger.

In KRX Markets, delivery of securities is carried out by the method of book-entry transfer at KSD (Korean Securities Depository) and cash payments are carried out through settlement banks (Bank of Korea or commercial banks designated by KRX).

Introduction to Trading at KRX Stock Market 2011 - Source: KRX

Why, then, did the STO market abandon this efficient single-ledger model in favor of a complex multi-ledger structure? It was not simply to adopt the new technology of blockchain. It was due to the atypicality of asset rights that a standardized, uniform ledger cannot accommodate.
Stocks and bonds are standardized products with established, uniform rules for trading and dividends. The KSD server only needs to process these standard rules. However, the underlying assets for security tokens—such as artwork, cattle, and music copyrights—are non-standardized securities with vastly different conditions for exercising rights and profit distribution logic.
Music Copyrights: Require unique logic for the immediate settlement of royalties based on daily streaming data.Real Estate/Artwork: Essential to have smart contracts that can reflect complex rights relationships, such as conditional profit distribution at the time of sale or value fluctuations of the underlying assets.
Attempting to house hundreds of these varying business logics on a single central server would inevitably restrict the design of innovative products. The intention behind financial authorities allowing the "Issuer Account Management Institution" was precisely to grant issuers the autonomy to design ledgers tailored to the specific characteristics of each asset.
The problem arises here. As each player built separate ledgers optimized for their own assets, the market as a whole ended up in a fragmented state lacking a common standard. Ultimately, as a result of sacrificing uniformity to accommodate asset innovation (non-standardization), we have inevitably entered an era of multiple ledgers speaking different languages.
3.2 The Galapagosization of the Korean STO Market
As a result of adopting the "Separation of Issuance and Distribution" principle for investor protection and embracing asset diversity, we are now faced with a market that is fragmented in both issuance and distribution. For a token issued on Brokerage A's proprietary chain to move to the KDX exchange, or for a token from Brokerage B's chain to be traded on the NXT exchange, a connection mechanism is required to verify trust and securely transfer data between ledgers using different protocols.
To resolve these issues and protect investors, the Korea Securities Depository (KSD) has taken on the role of managing the "Total Volume" across all distributed ledgers. To this end, KSD adopted a method of directly participating as a node in each issuer's distributed ledger to collect and verify data. While this was a necessary measure to fundamentally prevent total volume discrepancy accidents and ensure legal stability, it resulted in a technical trade-off regarding scalability, as every chain must now be connected individually.
As highlighted in reports by the Korea Capital Market Institute, the innovation of security tokens lies in overcoming time and space constraints and enhancing scalability. However, the current infrastructure prioritizes stability over openness, raising concerns that the Korean market may remain a closed "Galapagos" ecosystem.
Despite having completed its legal foundation, the Korean STO market now faces the risk of "liquidity arteriosclerosis" caused by technical silos. In the following chapter, we will closely analyze the technical structure of the infrastructure currently being pursued by KSD through its Request for Proposal (RFP).

4. Current Status Analysis: KSD’s Direct Connection Model and Its Costs
As previously observed, the market is already fragmented. The critical question now is how to manage these scattered ledgers. As the entity responsible for total volume management under the Electronic Securities Act, the Korea Securities Depository (KSD) launched its "Token Securities Test-bed Platform" project in the second half of 2024 to begin full-scale infrastructure verification.
The approach selected by KSD is a highly intuitive yet technically expensive Direct Node Participation model. By analyzing KSD’s Request for Proposal (RFP), we can examine the structural characteristics and inherent limitations of this model.
4.1 KSD’s Choice: Building Watchtowers in Every Silo
KSD’s approach prioritizes absolute control and oversight. Rather than simply monitoring the distributed ledgers (blockchains) established by issuers from the outside, KSD directly participates as a node in each respective chain to synchronize data in real-time.
According to the published RFP and architectural diagrams, KSD’s system consists of: ① the Total Volume Management System, ② the Node Deployment Management System, and ③ the Distributed Ledger System. The core feature is that KSD builds its platform by "directly participating as a node in all distributed ledgers in the market." In practice, this means KSD installs a dedicated total volume management node on Mirae Asset’s chain, Shinhan Securities’ chain, and every other issuer's infrastructure to directly synchronize data.
From an investor protection standpoint, this is a robust mechanism. Even if an issuer attempts to arbitrarily issue excess tokens (over-issuance) or manipulate the ledger, KSD can detect it immediately since it participates as a network member verifying transaction records. While this is considered the optimal choice for legal stability, the cost in terms of scalability is significant.
Participating as a direct node in multiple chains—each with different consensus algorithms and update cycles—not only increases operating costs but also poses risks of synchronization bottlenecks and latency. These technical hurdles can impede overall capital turnover in the market. As the number of market participants grows, the volume of nodes and data traffic KSD must manage will increase continuously, ultimately undermining the operational efficiency of the central management system.

4.2 The Dilemma of "N" Standards: KSD as the Universal Translator
The challenge is exacerbated by the sheer diversity of blockchains in the market. In the "Total Volume Management Node Construction" requirements of the RFP, KSD specified technologies such as Hyperledger Besu, Hyperledger Fabric, and Klaytn(Kaia) to reflect current market conditions. This effectively requires KSD to function as a "universal translator.”
Brokerage A (Hyperledger Fabric): KSD must build a Fabric node and communicate via its specific SDK.Brokerage B (Klaytn/EVM): KSD must build an EVM-compatible node and utilize RPC communication.Fractional Investment Firm C (Proprietary Chain): KSD must install yet another specialized node.

While this may be manageable with a few participants, the burden changes as the market matures and the number of issuers grows into the dozens. KSD would then need to maintain and update dozens of nodes, each speaking different "languages." Managing a centralized system where consensus algorithms, update cycles, and data standards are all fragmented leads to an exponential increase in administrative costs. Ultimately, KSD falls into a structural dilemma where it must develop complex gateways and interfaces individually for every different type of distributed ledger.
4.3 Limitations of Total Volume Management: Audit is Possible, but Mobility is Difficult
A more fundamental issue is that the current system is focused on "verifying total volume" rather than "facilitating asset mobility."
The primary objective of the KSD system is to "collect transaction information recorded on distributed ledgers to ensure the total issued volume matches the total circulation volume." While optimized for this auditing function, a "Bridge" function—which allows assets to move from Ledger A to Ledger B—is not a core part of the design.
However, market demand is different. Just as stock investors can freely move their shares between brokerages via inter-firm transfers, security token investors need the ability to move their assets from Brokerage A to Brokerage B in search of better liquidity or services. They also require access to various financial products based on those assets.
Under the current structure, moving a token from an account at Brokerage A to one at Brokerage B requires a "Burn-and-Mint" process rather than a direct inter-chain transfer. Ensuring Atomicity (the characteristic where a transaction either succeeds or fails in its entirety across both sides) while transferring data between chains with different tech stacks is a technical challenge far more difficult than simple volume inquiry.
For the sake of stability, KSD chose a closed "intranet" approach through direct connection. However, the market demands connectivity and the free flow of liquidity, not isolation. When the physical connection of dozens of silos built on different protocols reaches its limit, we must inevitably look toward infrastructure innovation through software-based connectivity—namely, verified interoperability solutions.

5. Infrastructure Strategy for Sustainable Growth
While the legislation has undoubtedly opened doors to new opportunities, the direct-connection-centric infrastructure model currently under discussion has clear limitations in terms of scalability. We conclude this article with three strategic recommendations required for the Korean security token market to synchronize with global markets beyond domestic borders.
5.1 Alignment with Global Standards: Transitioning to an Open Ecosystem
The Korean financial market is at a critical inflection point. We must learn from the past "Galapagosization" of our IT industry, which struggled with compatibility against global web standards due to an insistence on proprietary technical specifications. In a blockchain-based financial market, compatibility with global standards must be the top priority from the design phase.
The choices made by leading global financial institutions like J.P. Morgan and Deutsche Bank are clear. They are adopting hybrid open structures that maintain the security and control of private chains while flexibly absorbing the massive liquidity of public chains. The Korean STO market will only achieve true competitiveness when it moves beyond building localized silos and aims for a "connected finance" environment that can communicate seamlessly with the global blockchain ecosystem.
5.2 KSD and Financial Authorities: Establishing an Efficient Management Framework
The most immediate task is harmonizing regulatory compliance with technical scalability. The role of the Korea Securities Depository (KSD) in total volume management and oversight is indispensable as the final bastion of market trust. However, the method of performing this oversight should shift from physical direct connection to a software-based approach that ensures technical flexibility.
The current method of participating as a node in every issuer's chain to synchronize data provides strong control but will be difficult to sustain due to the management costs and engineering overhead as market participants surge.As an alternative, the adoption of proven interoperability protocols as middleware should be actively considered. This approach would allow KSD to complete a flexible oversight framework, focusing on its core duties of data monitoring and risk management rather than the burden of individually managing technical fragmentation across various chains.
5.3 Brokerages and Issuers: Maximizing Asset Value
As Issuer Account Management Institutions, securities firms and fractional investment providers must ensure alignment with global markets so that Korean security token assets can be fairly valued on the international stage.
Korea’s attractive underlying assets—including K-content, prime commercial real estate, and Intellectual Property (IP)—possess sufficient appeal for global investors. For these assets to be recognized at their true value without a "Korea Discount," the possibility of connection with other platforms and global liquidity must remain open from the design phase. Pre-emptively adopting universal messaging technologies and interoperability infrastructure to build pipelines that safely connect proprietary tokens with diverse ecosystems is the fastest way for the Korean STO market to establish itself globally.
5.4 Completing Financial Innovation Through Connectivity
The completion of STO legislation in January 2026 marks the prelude to a digital transformation of the Korean capital market. If the regulatory system has created a solid vessel to hold innovation, technology must now pave the way for those vessels to be harmoniously connected to create new value.
Unifying a fragmented market is the key to increasing market efficiency and maximizing benefits for all participants, going beyond a mere technical challenge. Interoperability technology, which implements software-based connectivity beyond physical constraints, will serve as a vital stepping stone to resolve the complexities of the multi-ledger era and propel the Korean STO market to the next level. We look forward to an infrastructure revolution toward an open ecosystem that breaks free from isolated silos and completes the globalization of the Korean STO market.

Key Sources
Yulchon LLC – Passage of the Amendments to the Electronic Securities Act and the Capital Markets Act Regarding Token Securities (STO) at the National Assembly Plenary Session
Shin & Kim – Tokenization of All Assets: The Financial Revolution Brought by Token Securities (STO) Legislation
Bae, Kim & Lee (BKL) – Passage of the Amendments to the Act on Electronic Registration of Stocks, Bonds, etc. and the Capital Markets and Financial Investment Business Act for Institutionalizing Token Securities (STO) at the Political Affairs Committee
Korea Securities Depository (KSD) – Request for Proposal (RFP) for the Token Securities Test-bed Platform Construction Project
Korea Capital Market Institute (KCMI) – Key Issues and Development Plans for the Establishment of Token Securities Issuance and Distribution Systems
Korea Securities Depository (KSD) – Launch of the Token Securities Test-bed Platform
Financial Services Commission (FSC) – Results of Preliminary License Applications for Fractional Investment OTC Exchanges (Distribution Platforms)
Korea Capital Market Institute (KCMI) – Major Issues in Establishing the Token Securities Issuance and Distribution System
KRX – Introduction to Trading at KRX Stock Markets

Disclaimer
The contents of this report are for informational purposes only and do not constitute a recommendation or basis for legal, business, investment, or tax advice under any circumstances. References to specific assets or securities are for informational purposes only and do not represent an offer, solicitation, or recommendation to invest. The final responsibility for any investment decisions lies solely with the investor, and this report should not be used as a guideline for accounting or legal judgment.
As a matter of principle, the author does not trade related assets using material non-public information obtained during the research or drafting process. The author and Catalyze may have financial interests in the assets or tokens discussed herein and may serve as a strategic partner to certain networks.
The opinions and analyses expressed in this report reflect the author's personal views and do not necessarily represent the official position of Catalyze or its affiliates. All information is current as of the date of publication and is subject to change without prior notice.

Ripple is establishing itself as a core foundation of the U.S. financial system. With the Office of the Comptroller of the Currency (OCC)’s preliminary conditional approval of Ripple National Trust Bank (RNTB) , the XRPL ecosystem has secured a definitive foothold to advance into the center of institutional finance.

1. Introduction: From Crypto Enterprise to National Bank
For years, the defining narrative of the crypto asset industry has been regulatory uncertainty. However, 2025 will be recorded as the year this narrative was completely overturned.
On July 18, 2025, President Trump signed the GENIUS Act, establishing the United States' first federal regulatory framework for stablecoins. This marked the definitive signal for blockchain-based finance to enter the core of institutional finance.

The apex of this regulatory innovation occurred on December 12, 2025, with the decision by the Office of the Comptroller of the Currency (OCC). The OCC granted preliminary conditional approval for the establishment of the Ripple National Trust Bank (RNTB), applied for by Ripple Labs Inc.. This approval is more than the acquisition of a new license; it is an event that redefines the status of the entire crypto ecosystem.
1.1 The Paradigm Shift Signified by RNTB Approval
Previously, Ripple operated by obtaining money transmitter licenses on a state-by-state basis or through trust companies recognized only in New York. However, the newly approved RNTB commands a significantly higher level of public trust.
National Bank Status: RNTB holds the status of a 'National Bank' recognized across the entire United States, rather than being limited by specific state permits. This is akin to obtaining a "Pre-pass," allowing operations under a single set of federal rules across the entire U.S. market, bypassing fragmented local regulations.Direct Competition with Traditional Financial Institutions : As a federal financial institution under the direct supervision of the OCC, Ripple now competes on the same legal footing as traditional banking giants like Goldman Sachs and J.P. Morgan.
What is a Federal Trust Bank? Unlike commercial banks that primarily take deposits and issue loans, a National Trust Bank limits its operations to those of a trust company. It specializes in fiduciary activities, such as the custody and safekeeping of clients' critical assets (cash, equities, digital assets, etc.), under federal government-level guarantees.

1.2 Federal-Grade Governance Led by Industry Veterans
The fact that RNTB is a bank in more than just name is evident in its board composition. To transcend its image as a tech company and secure financial trust, Ripple has positioned heavyweights from traditional finance—those who designed global payment infrastructures—at the forefront.

The involvement of such an expert group signifies that RNTB is fully prepared to meet the federal government’s stringent capital requirements and security system standards

2. Redefining $RLUSD: A Stablecoin Managed by a Bank
Until now, trust in stablecoins has relied primarily on voluntary transparency reports by issuers or attestations from third-party accounting firms. However, $RLUSD under the Ripple National Trust Bank (RNTB) regime operates on a different dimension. It functions not on corporate promises, but on legal obligations mandated by U.S. Federal Banking Law.
This signifies that the safety of the asset has transcended the internal vaults of a corporation and has been fully integrated into the federal regulatory perimeter, monitored daily by the national system.
2.1 Legal Separation of Issuance and Management: A "Double-Lock" Fiduciary Structure
The most critical insight from the establishment of RNTB is the strict separation, under federal regulation, between the entity issuing the coin and the entity managing the funds that preserve the asset's value.
Issuer (SCTC): As before, the issuance of the coin is handled by Standard Custody & Trust Company (SCTC), a trust company regulated by the New York State Department of Financial Services (NYDFS).Manager (RNTB): However, the actual reserves guaranteeing the coin's value are custodied and managed directly by RNTB, a federal bank.

This "Double-Lock" Trust Structure is a robust design that erects legal and physical barriers, ensuring that the operational risks of the issuer do not directly impact the safety of the reserves.
2.2 Elevation of Reserve Management: Fiduciary Responsibility
The fact that RNTB provides services under Fiduciary Responsibility, going beyond simple asset storage, sends a powerful message to institutional investors.
What is Fiduciary Responsibility? It is the highest standard of legal duty in the financial sector, mandating that "the client's interests must unconditionally take precedence over one's own." Violation of this duty results in severe penalties under Federal Banking Law.
Pursuant to 12 U.S.C. § 92a of the National Bank Act, RNTB must manage user funds in segregated accounts, strictly isolated from other assets. Consequently, $RLUSD holders are recognized not merely as token holders, but as beneficiaries of trust assets protected by the legal liability of a federal bank.
2.3 Synergy with the GENIUS Act: Who is Protected First?
The GENIUS Act, signed by President Trump, further fortifies $RLUSD. The core of this legislation specifies that even if a stablecoin issuer falls into insolvency, holders are protected in priority over other creditors.
Furthermore, the OCC has imposed stringent financial conditions to ensure RNTB remains unshakable under any circumstances:
Maintenance of Tier 1 Capital: Must maintain a robust core capital of at least $11.7 million at all times.Securing High-Quality Liquid Assets (HQLA): Must hold more than 50% of its capital in cash or U.S. Treasury securities maturing within 90 days—assets that are immediately liquidatable.Securing Operating Expenses: Must separately maintain 180 days (approx. 6 months) of operating expenses in a usable form to prepare for contingencies.
2.4 From Corporate Credit to Federal Assurance
If existing stablecoins appealed to the market by saying "Trust our technology and disclosures," $RLUSD proves the fact that "We operate as part of the U.S. Federal Banking System."
The fact that reserves are custodied and managed within a banking system directly supervised by the OCC is the decisive differentiator that transforms $RLUSD from a mere digital asset with a fixed value into a fundamental settlement asset of institutional finance that global financial institutions can adopt with confidence.

3. A New Horizon for $XRP: Fed Master Accounts and a Liquidity Hub
While the RNTB approval made headlines, the most critical detail for experts lies elsewhere. It is the fact that $XRP, the core asset of the Ripple ecosystem, has secured a legal pathway to interface directly with the payment network of the Federal Reserve, the heart of the U.S. central banking system.
3.1 The Fed Master Account: Entering the Financial Superhighway
In its approval decision, the OCC specified a highly concrete condition: for RNTB to operate as a national bank, it "will apply for stock in a Federal Reserve Bank in accordance with 12 USC 222."
What is a Master Account?
It is a "Top-Tier Account" opened directly with the U.S. Central Bank (The Fed). Holding this account grants direct access to the national funds transfer network, Fedwire, bypassing the complex intermediation of other commercial banks.Integration with $XRP: If cross-border transfers using $XRP were previously akin to cars driving on local roads, they have now secured a "toll pass" to enter the Financial Superhighway managed by the Fed.
This implies the potential for $XRP to function as a key tool for Hybrid Settlement, combining national-level payment systems with on-chain liquidity in real-time.
3.2 Formalization of Institutional Custody: $XRP on Institutional Balance Sheets
Historically, the primary hesitation for major financial institutions to hold $XRP at scale was the absence of a "Government-Certified Vault" they could trust. RNTB resolves this structural deficit.
Birth of a Federal-Grade 'Digital Vault': RNTB has been officially granted the authority to act as a custodian for safe-keeping digital assets under 12 U.S.C. § 92a of the National Bank Act.Elevation of Legal Status: The fact that a bank under U.S. federal supervision manages $XRP under Fiduciary Responsibility signifies that $XRP has exited the regulatory gray zone. It has become a recognized asset officially custodied and distributed within the U.S. banking system.
3.3 Securing Institutional-Grade Expertise in Custody and Settlement
RNTB’s board of directors is comprised of premier experts optimized to stably manage the sophisticated custody and settlement functions mandated for a federal bank. Their collective expertise provides the operational confidence necessary for $XRP to transcend its status as a mere asset and be safely custodied and circulated within the infrastructure of institutional finance.
Global Standardization of Custody Infrastructure: Director Timothy Keaney’s extensive know-how in global custody operations ensures that RNTB’s virtual asset custody services meet the stringent security and management standards demanded by both federal regulators and major institutional investors.Advancement of Settlement Risk Management: Director David Puth’s unrivaled expertise in FX and stablecoin settlement underpins the design of real-time payment and settlement processes utilizing $XRP, ensuring they are built upon a foundation of operational stability comparable to traditional financial systems.

4. Convergence of XRPL and the "Crypto Trinity": Institutional L1 Infrastructure
The launch of the Ripple National Trust Bank (RNTB) is not merely the addition of a financial license. It is the decisive puzzle piece that, in conjunction with the "Crypto Trinity" acts legislated in 2025—the GENIUS Act, the Clarity Act, and the Anti-CBDC Surveillance State Act—anchors the XRPL ecosystem as core infrastructure within the U.S. federal regulatory net.
4.1 The Clarity Act: Ending the Security Debate and Birth of Certified Infrastructure
For years, the persistent question plaguing blockchain projects has been: "Is this coin a security?" The Clarity Act serves to eliminate this uncertainty.
Mature Blockchain Classification: The Act classifies systems that are technically stable and sufficiently decentralized as "Mature Blockchains," shifting jurisdiction from the SEC (Securities and Exchange Commission) to the CFTC (Commodity Futures Trading Commission).Status of XRPL: With over a decade of stable operational history, XRPL has the highest probability of being the first to be certified as a "Mature System" under this legislation. This implies that assets issued on XRPL will be liberated from legal controversies, securing the transparency required for institutional-grade trading.
4.2 Anti-CBDC Surveillance State Act: An Exclusive Opportunity for Private Digital Dollars ($RLUSD)
Passed under the Trump administration, the Anti-CBDC Surveillance State Act prohibits the Federal Reserve from directly issuing a central bank digital currency (CBDC) for individuals.
Private Sector Leadership: Instead of a government monopoly on the currency market, the policy encourages compliant private entities to fulfill this role through stablecoins.Market Preemption by $RLUSD: $RLUSD, which fully complies with federal regulations and operates under RNTB supervision, is positioned to fill the void left by the banned state-issued CBDC. It now faces an exclusive opportunity to establish itself as the de facto standard digital dollar for payment and settlement within the U.S.
4.3 Legal Assurance for RWA: Bridging Digital Tokens and Real-World Rights
The central issue in Real World Asset (RWA) tokenization—digitizing real estate, gold, bonds, etc.—is the question: "How is it legally guaranteed that my token represents the actual asset?"
RNTB has been granted specialized authority by the OCC to perform Custody and Safekeeping duties pursuant to 12 U.S.C. § 92a of the National Bank Act.

Through this mechanism, actual assets remain safe in federal bank vaults, while the rights to them can be securely traded anywhere in the digital world.

5. A New Tipping Point for the XRPL Ecosystem
With the establishment of the Ripple National Trust Bank (RNTB), the XRPL ecosystem has secured more than just technological superiority; it has acquired a "Regulatory Moat" that is virtually impossible for competitors to replicate.
XRPL is now transforming from a mere blockchain network into a massive Financial Clearinghouse where institutional capital flows legitimately within the robust boundaries of federal law.
5.1 Native DEX & AMM: A Stage for Institutional Capital
Historically, despite their superior speed and low fees, the Native DEX (Decentralized Exchange) and AMM (Automated Market Maker) on XRPL faced an invisible wall preventing institutional entry: the inability to guarantee 100% trust in the traded assets.
Unlocking the Trust Bottleneck: Now, trading centers around $RLUSD, directly managed by a federal bank (RNTB) , and $XRP, which enjoys federal-level custody standards.Supply of Institutional Liquidity: Institutions can now provide their funds as liquidity within a secure environment supervised by the state, pursuant to the National Bank Act (12 U.S.C. § 92a).
This transition is akin to the evolution of opaque Over-the-Counter (OTC) markets into modern, state-certified stock exchanges. As Counterparty Risk is effectively eliminated, the gates have opened for large-scale capital to flow confidently into XRPL's liquidity pools.
5.2 Global Regulatory Equivalence: Beyond Korea to the World
The GENIUS Act passed in the U.S. and Ripple's Federal Bank model are highly likely to establish themselves as the Global Standard for crypto asset regulation.
Regulatory "Pre-pass": The GENIUS Act contains "Equivalence" requirements to determine if other nations' regulations match U.S. standards.Benchmark of Global Trust: RNTB has cleared the rigorous standards of the OCC. This serves as powerful rationale for global financial authorities (including Korea) to accept XRPL-based services as trustworthy, institutional-grade services without requiring redundant, complex verification processes.
5.3 Evolution into a New Financial Operating System (OS)
Ripple has now become an entity capable of directly operating federal banking infrastructure.
Real-Time Settlement Network: RNTB plans to provide all custody and settlement services via electronic means.Integration with National Payment Grids: The on-chain liquidity of XRPL will interlock in real-time with Fedwire, the U.S. national payment network.
Ultimately, XRPL has solidified its status not merely as Ripple's proprietary network, but as the new Backend of Global Finance—the safest and fastest processing layer for cross-border monetary flows.

6. The 2026 Ripple Ecosystem: Dominating the Backend of Finance
The establishment of the Ripple National Trust Bank (RNTB) and the completion of the federal regulatory framework clearly demonstrate the destination of the innovation the Ripple ecosystem has pursued over the past decade. Ripple is now anchoring itself not merely as a crypto asset enterprise, but as the Core Backend of a financial system authorized and supervised by the U.S. Federal Government.
6.1 Securing a Powerful Competitive Advantage Based on Regulation
If regulatory uncertainty was the stumbling block for the Ripple ecosystem in the past, regulation has now transformed into a formidable Entry Barrier and Regulatory Moat that no other project can covet.
Protection under the National Bank Act: Having received preliminary conditional approval from the OCC, RNTB operates under the direct protection of the U.S. National Bank Act.Robust Fiduciary Powers: Through fiduciary powers pursuant to 12 U.S.C. § 92a, RNTB manages assets in the manner most trusted by institutional investors.Overwhelming Financial Soundness: By maintaining a minimum of $11.7 million in Tier 1 Capital and holding 180 days of operating expenses at all times, RNTB has secured credibility on par with traditional finance.
This Institutional Safety Valve provides the sole pathway for institutional investors to enter the XRPL ecosystem without risk—a unique value proposition of Ripple ecosystem that other technologies attempting to circumvent regulation can never possess.
6.2 The Final Destination of the Crypto Ecosystem: Complete Integration with Institutional Finance
The three pillars of the Ripple ecosystem, confirmed through this analysis, interlock organically within the massive infrastructure of a Federal Bank as follows:

The Ripple ecosystem ultimately seeks to advance a more efficient financial system that operates within the regulatory and stability framework of traditional finance. By 2026, Ripple will have become the standard infrastructure for efficient digital finance—where global financial institutions issue, custody, and settle assets in real-time.
We are witnessing a historic moment where crypto assets migrate to the cardiac center of the mainstream financial system.

Key Sources
OCC - Application to Charter Ripple National Trust Bank
Ripple Labs Inc. - RIPPLE NATIONAL TRUST BANK
OCC - OCC Announces Conditional Approvals for Five National Trust Bank Charter Applications
Lee & Ko — The Enactment of the "GENIUS Act" and Trends in U.S. Stablecoin Regulation

Disclaimer
The contents of this report are for informational purposes only and do not constitute a recommendation or basis for legal, business, investment, or tax advice under any circumstances. References to specific assets or securities are for informational purposes only and do not represent an offer, solicitation, or recommendation to invest. The final responsibility for any investment decisions lies solely with the investor, and this report should not be used as a guideline for accounting or legal judgment.
As a matter of principle, the author does not trade related assets using material non-public information obtained during the research or drafting process. The author and Catalyze may have financial interests in the assets or tokens discussed herein and may serve as a strategic partner to certain networks.
The opinions and analyses expressed in this report reflect the author's personal views and do not necessarily represent the official position of Catalyze or its affiliates. All information is current as of the date of publication and is subject to change without prior notice.

Squid turns fragmented multi-chain steps—bridging, swapping, gas provisioning, and destination contract execution—into a single routed flow, enabling “one entry point” onboarding from any chain.
1. Introduction: The Multi-Chain Liquidity Problem
The public blockchain ecosystem is no longer single-chain; it is inherently multi-chain, with L1s, L2s, rollups, and appchains coexisting.
Instead of operating assets within a single network, users move their assets across multiple chains to allocate, transfer, and swap them. In the process, both liquidity and user experience are fragmented at the chain level, and service providers find themselves facing the challenge of integrating infrastructure separately for each chain.
1.1 Fragmented Chains/Liquidity and User Experience
Today’s Web3 liquidity is spread across chains, centered around chain-specific DEXes, bridges, and token standards as L1s, L2s, rollups, and appchains proliferate. Even for “the same asset,” the wrapping format and circulation path differ by chain, and users must constantly deal with the inconvenience of having to check which chain they hold it on and in what form.
When we go down to the actual usage flows, the problem becomes clearer. During onboarding, users often have to chain together bridge usage, CEX transfers, DEX swaps, and gas token acquisition. Different UI and security models apply at each step, increasing operational complexity end-to-end. From a service provider’s point of view, to handle users coming in from any chain, they must repeatedly design onboarding, payment, and withdrawal flows for each chain.
1.2 Limitations of Bridge/CEX-Centric Multi-Chain UX
As a response to liquidity fragmentation in multi-chain environments, the use of bridges and CEXes has become the dominant approach. Bridges provide the ability to recreate tokens across chains, but their implementations and security models vary widely. And users must not only choose a bridge and assess the associated risks themselves, but also repeatedly go through separate swap and gas-funding steps even after switching chains.
CEX-based routing may look simple in the short term, but it creates heavy dependence on account/KYC/withdrawal policies and is vulnerable to regulatory and policy changes.
More importantly, both approaches focus on moving tokens, but do not tie onboarding, payment, and additional contract calls into a single coherent flow.
Ultimately, the problem converges not on “how to move tokens,” but on “how to unify multi-chain execution flows into a single experience.” Squid is a cross-chain liquidity router designed to address exactly that challenge.
2. Cross-Chain Stack: Infra vs Application
In a multi-chain environment, the interoperability stack can broadly be divided into two layers:
An infrastructure layer that enables cross-chain messaging and token movementAn application layer that composes real scenarios on top of that foundation (swaps, gas handling, app entry, etc.)
To understand Squid, it helps to first separate what the infrastructure layer guarantees from what the application layer designs.
2.1 Infra Layer: Messaging and Bridging (Axelar, Wormhole, LayerZero)

The infrastructure layer is responsible for “cross-chain delivery.” In other words, it provides common patterns that allow messages (call data) and tokens (value) to move across chains. Protocols such as Axelar, Wormhole, and LayerZero build the foundation for interoperability at this level.
Two points matter here:
The infrastructure layer provides standardized primitives for cross-chain messaging and token movement.On top of those primitives, a separate application decides what to swap, which route to take, how to handle gas, and which contracts to call.
In short, infrastructure is closer to building roads between chains. On top of those roads, you still need an application layer that composes swaps, gas funding, and contract calls into a user-facing flow.
2.2 Infrastructure Layer vs Application Layer

If infrastructure makes “delivery” possible, Squid is the routing layer that designs the “execution” flow on top of it.
A roads-and-transport analogy makes the distinction intuitive:
Infra (e.g., Axelar/Wormhole/LayerZero) = road networkIt corresponds to the highways and roads that connect different cities (chains).It determines where roads are open and in which directions vehicles can move.Squid = transport service (navigation/toll system)It designs which route users take when traveling from city A to city B, and where they transfer or stop along the way.It composes liquidity pools, DEXes, gas tokens, and additional contract calls into a concrete travel experience.
While the infrastructure layer focuses on defining cross-chain deliverability, the application-layer router Squid—built on Axelar’s GMP—takes on the role of composing and executing the actual end-to-end execution flow.
3. Squid: A Multi-Chain Liquidity and Payments Router
Once chains can be connected, Squid completes the flow with payment and execution.
The key challenge is how to design a single consistent entry point for users and services in an environment where chains and assets are all heterogeneous.
3.1 Cross-Chain UX and Liquidity Problems Targeted by Squid
In a multi-chain environment, users face challenges that go beyond the complexity of simply managing multiple chains.
When attempting to move from holding assets on one chain to using DeFi, NFT marketplaces, or games on another, the steps required for asset transfer and execution become fragmented across multiple stages.
Swap tokens on the source chain into a stablecoin or other bridge-friendly assetBridge that asset to the destination chainSwap again into the desired token on the destination chainIf necessary, acquire gas tokens and finally call the target application contract
Each step requires a separate interface, a separate signature, and a separate fee, with many opportunities for mistakes and risk along the way. As chain/token combinations become slightly more complex, users tend to prefer detouring via a CEX.
From the perspective of service providers and developers, the trade-off is also clear. If you concentrate liquidity on a single chain, onboarding remains simple, but you effectively give up multi-chain users. Conversely, if you directly integrate multiple bridges and DEXes to implement a cross-chain UX, you face growing burdens such as:
Managing edge cases for each combination of chain, token, and bridgeIncreased operational complexity around gas funding, failure rollback, and fee structures
In the end, there is a gap between the two requirements: services want a single entry point no matter which chain users come from, while users want an entry experience about as simple as a CEX. Squid is a cross-chain liquidity and payments router application designed to narrow this gap.
3.2 Squid’s Role: Cross-Chain Liquidity and Payments Routing
Squid is a cross-chain liquidity & payments router application that unifies DEX liquidity across multiple chains into a single router.

From a user’s point of view, they can submit a single request like “token A on chain X → token B on chain Y + (optionally) a specific contract call,” and Squid composes the underlying bridge path, swap route, and contract-call sequence.
Summarizing Squid’s role in solving the cross-chain UX and liquidity problem:
Liquidity routingSquid connects liquidity that is scattered across chains and DEXes, and finds & executes an optimal route (in terms of cost and path) for converting token X into token Y on another chain. Bridges and swaps are handled as a single flow.Payments/onboarding routing + additional contract callsBeyond simple swaps, Squid is designed to call a specific contract on the destination chain in one go. For example, buying an NFT on chain B with assets from chain A, or entering a DeFi position on chain C with tokens from chain A can be handled within a single transaction flow.
From the perspective of service providers, Squid offers a way to delegate the design of multi-chain liquidity and payment infrastructure to a single router rather than building it all in-house.
Developers can define only the chain, token, and contract they want users to ultimately reach through the Squid SDK/API, and the combination of Axelar + Squid takes care of the intermediate steps: bridging, swapping, gas handling, and message passing.
As a result, Squid delivers a CEX-like user experience while operating on a decentralized cross-chain stack.
4. Squid Technical Architecture: Design and Transaction Flow
From a technical perspective, Squid can be analyzed along three axes:
How it connects DEXes and liquidity across chains to find routesHow it uses Axelar GMP to execute cross-chain swaps and contract callsHow developers can integrate Squid into real services in practice
4.1 Liquidity Routing: Connecting Chains and DEXes
Squid’s basic unit is a swap path between token A and token B. Here, A and B may live on the same chain or on different chains. Squid aggregates DEXes and liquidity pools across chains to construct executable swap routes for each requested combination of source/destination asset and chain.
Conceptually, the structure is as follows:
The Squid router composes source asset → intermediate bridge asset → destination asset flows by combining DEXes and pools integrated on each chain.Swaps within the same chain are handled by that chain’s DEXes, and only the segments that require chain-to-chain movement are handled via Axelar.
Service developers do not need to manage liquidity or design bridge/swap combinations for each chain and DEX. They only define the assets and chains the user holds and what the service wants to receive. Squid’s routing logic handles the path finding and execution in between.
4.2 Cross-Chain Swap and Call Flow Based on Axelar GMP

Squid’s cross-chain swap and contract-call flow is built on Axelar’s General Message Passing (GMP). Conceptually, it works as follows:
Calling the Squid contract on the source chainThe user calls the SquidRouter contract on the source chain, requesting conversion from their current token into a specific token on the destination chain (optionally with a contract call on that destination). If needed, a swap is performed on the source chain first to convert the asset into a bridge-friendly form.Message passing and chain-to-chain movement via AxelarThe SquidRouter contract constructs a message, via the Axelar Gateway, that includes which contract to call on the destination chain and with which parameters. The Axelar validator set reaches consensus on the event on the source chain and relays the message to the destination chain.Swaps and contract execution on the destination chainOn the destination chain, the SquidRouter contract receives the message via the Axelar Gateway, performs any required swaps via DEXes, and finally calls the specified contract (e.g. a DeFi protocol, NFT marketplace, or game contract). From the user’s point of view, they have only sent a single transaction on the source chain, yet end up with both token conversion and contract execution completed on the destination chain.
This structure allows users to avoid manually performing bridge → swap → gas acquisition → contract call as separate steps. Axelar handles cross-chain messaging and state propagation, while Squid composes asset conversion and contract-call sequences on top.
4.3 Developer Experience: SDK, API, and Widget Integration Patterns
From a service developer’s perspective, Squid is less a pure backend infrastructure component for cross-chain functionality and more an application-level tool that can be easily integrated into both the frontend and backend.
Squid supports two integration paths to provide a flexible developer experience.

Cross-chain widget integrationA low-friction option where services embed Squid’s provided UI widgets directly into their views. Users choose source/destination chains and tokens through the widget, and the service only needs to consume the outcome and connect it to their final contract.API/SDK integrationWhen more fine-grained control is needed, developers can use the JS SDK or REST API to construct routing requests directly and handle transaction creation, signing, and status tracking within their application logic.
This integration approach allows service providers to avoid designing multi-chain onboarding, payment, and funding flows from scratch. Instead, they can quickly set up cross-chain UX through Squid and spend more time on the business logic itself.
Additionally, Squid offers execution options such as CORAL / CORAL V2, pointing toward more extensible routing and execution flows beyond basic swaps.
5. Integrator and Ecosystem View: Squid as Multi-Chain Stablecoin/RWA Rails
For teams operating services in a multi-chain environment, the real concern is less about “which bridge to choose” and more about how to converge users and liquidity dispersed across chains into a single onboarding and payment flow.
Squid absorbs these fragmented entry points into a single liquidity and payments routing layer, providing an experience close to a single entry point for both services and users.
5.1 Common Benefits for Live Services (DeFi, Games, Infrastructure)
Projects considering multi-chain expansion typically face two options:
Focus on a single chain to keep onboarding simple, while essentially giving up a large portion of users/liquidity on other chainsSupport multiple chains, but accept complex onboarding flows by designing bridge/DEX/gas onboarding separately for each chain
The latter expands the user pool and usage surface, but onboarding paths become complex and conversion rates are likely to drop. In particular, managing different bridges and swap routes for each chain becomes an ongoing operational burden.
Squid simplifies this by acting as a multi-chain entry point via a single router. Services only need to define two things:
Which chains/tokens users may enter with (set of source chains/tokens)Which chain/token the service ultimately wants to receive (set of destination chains/tokens)
The combination of bridges and DEXes in between, gas token acquisition, and the sequence of any additional contract calls are handled by Squid’s routing logic. As a result, services no longer need to design separate onboarding flows for each chain, but can build a single entry screen that accepts users from multiple chains.
From a UX standpoint, this makes chainless onboarding more achievable. Users do not need to worry about which chain they are currently on or which bridge they should use; they can keep a simple mental model of “I use the assets in my wallet to enter this service.” DeFi, gaming, and infrastructure projects can design multi-chain services where users start with the same UX regardless of entry chain, reducing drop-off during onboarding while expanding the range of supported chains.
5.2 Impact for Stablecoin and RWA/STO Projects
Stablecoin and RWA/STO projects need to manage issuance, redemption, and settlement on a hub chain that fits regulatory, accounting, and risk-management requirements, while distributing and redeeming tokens on multiple sub-chains where real-world investment, payments, and trading demand exist.
Traditional approaches are typically some combination of:
Listing on major CEXes and securing trading pairsBuilding custom bridges for each chainDesigning distinct on/off-ramp and settlement logic for each chain
This can look flexible initially, but as the number of chains and bridges grows, the cost and complexity of maintaining separate settlement, risk, and monitoring frameworks for each configuration rise quickly.
Squid reframes this problem as a common multi-chain distribution rail. You can design a structure where the hub chain remains the control point for cross-chain circulation state and supply flow, while inflows and redemptions on surrounding chains—where investment and payment traffic actually happens—are handled through Squid routing.
Issuers and financial institutions can manage issuance, redemption, circulating supply, and risk from the hub chain while simultaneously achieving:
A consistent user experience where the same asset can be used on any chainReduced dependence on CEXes and custom bridges, and lower operational overhead for multi-chain operations
Here, Squid is not the issuer of tokens, but the router that designs and executes how already-issued assets are used and redeemed across chains. Maintaining the structure of hub-chain-centric accounting and regulatory compliance with sub-chains investment/payment usage in a consistent pattern is also beneficial for regulatory and audit responses.
6. Conclusion: Squid’s Strategic Position as Multi-Chain Stablecoin/RWA Rails
Discussions around stablecoins and RWAs have largely focused on which chains and bridges are safer and faster. However, safety and speed alone are not sufficient. From a UX perspective, the additional question in a multi-chain environment is:
“Can we handle multiple chains and assets within a single, consistent onboarding, payment, and settlement flow?”
Interoperability networks provides an infrastructure-level answer as an interoperability network, while Squid acts as the application that unifies liquidity routing and payment flows on top of it.
Instead of interpreting different rules and UX patterns for every bridge and chain, projects can implement multi-chain onboarding, distribution, and redemption as common patterns on the combined stack of infrastructure + Squid router.
Today, Squid offers widget and API/SDK integrations for 100+ chains, including EVM, BTC, Solana, XRPL, Hedera, and Cosmos. It has safely processed over 3 million cross-chain transactions with cumulative volume exceeding $5 billion. Integrations with major wallets, DEXes, swap services, and infrastructure protocols such as MetaMask, PancakeSwap, Trust Wallet, dYdX, and Circle are already in place.
By leveraging this already-proven common rail, projects can concentrate regulatory, accounting, and risk frameworks on a chosen hub chain while implementing distribution and payment expansion to surrounding chains through relatively lightweight integrations.

Therefore, Squid is not just a simple cross-chain swap tool, but an application that can play the following roles in a multi-chain stablecoin and RWA environment:
From the service perspective: a multi-chain entry rail where users can onboard in a single flow from any chainFrom the issuer and financial-institution perspective: a distribution and redemption rail that manages multi-chain circulation from the hub chain’s point of view

Building on these roles, Squid is moving at the forefront as multi-chain stablecoins and RWAs transition from “infrastructure” to real-world usage. It delivers an end-to-end UX that completes swaps, bridging, gas handling, and contract calls in a single request, while offering services a practical way to “delegate” multi-chain operational complexity to the router.
As multi-chain stablecoins and RWAs move to the center of the industry agenda, Squid is recognized as a leading player in cross-chain liquidity routing.

Key References
Squid Dev Docs
Squid Ecosystem
Squid Is Cross-Chain Liquidity for Everyone - Axelar Blog
Squid: Single Click Cross-Chain Swaps and Messaging
Coral: Intent Swaps
Other References
The State of Cross-Chain Messaging: Squid Router x Axelar Core
Squid Router and the Future of Interchain Liquidity
Introducing Cross-Chain Swaps with Axelar on our DEX Aggregator (Use-Case)

Disclaimer
The contents of this report are for informational purposes only and do not constitute a recommendation or basis for legal, business, investment, or tax advice under any circumstances. References to specific assets or securities are for informational purposes only and do not represent an offer, solicitation, or recommendation to invest. The final responsibility for any investment decisions lies solely with the investor, and this report should not be used as a guideline for accounting or legal judgment.
As a matter of principle, the author does not trade related assets using material non-public information obtained during the research or drafting process. The author and Catalyze may have financial interests in the assets or tokens discussed herein and may serve as a strategic partner to certain networks.
The opinions and analyses expressed in this report reflect the author's personal views and do not necessarily represent the official position of Catalyze or its affiliates. All information is current as of the date of publication and is subject to change without prior notice.

Backed by Ripple's enterprise vision, the XRPL secures both regulatory compliance and the benefits of public chains, emerging as a powerful choice for institutions in the era of regulated blockchains.
1. Introduction: Is the Regulatory Approach Correct
1.1 Public Blockchains and the Regulatory Lag
One of the significant hurdles for traditional finance in adopting blockchain is not a technological deficit, but a regulatory time lag. Currently, the regulatory frameworks that some authorities are attempting to apply to public blockchains are failing to keep pace with the velocity of technological evolution.

The most prominent example is the Basel Committee on Banking Supervision's (BCBS) "Cryptoasset Exposures (SCO60)." This framework classifies the vast majority of assets issued on public (permissionless) blockchains as Group 2b, assigning them a punitive risk weight of 1,250%.
In practice, this mandates that for every $1 of tokenized assets held on a public blockchain, a bank must hold $1 of capital. This prohibitive capital requirement effectively acts as a de facto ban, dissuading banks from leveraging public blockchain infrastructure.

1.2 The Dichotomy and the Market Value Disconnect
The root cause of this excessive regulation lies in an antiquated dichotomy. Regulators continue to view blockchain through a binary lens: "Private is controllable and therefore safe; Public is anonymous and uncontrollable, therefore risky."
In the SCO60 document, the BCBS treats "public blockchains" as synonymous with "permissionless" and "private blockchains" as "permissioned." By equating all public blockchains with the "wild west" era of early Bitcoin, they fail to price in the overwhelming market value that public blockchains provide as infrastructure: deep liquidity, interoperability, and continuous technological innovation.

Evidence of Pushback: This disconnect was starkly highlighted by the letter submitted to the BCBS in August 2025 by major global financial trade associations—including the AFME, IIF, and ISDA—calling for a suspension and recalibration of the SCO60 standards. These associations argue that the current standards impose overly conservative and punitive capital requirements that do not accurately reflect the actual risk profile of cryptoassets, nor do they align with existing market risk management practices. They emphasize the imperative for a more balanced approach that aligns with real-world risks and encourages responsible innovation within the regulatory perimeter.
1.3 The Limits of Protocol Regulation: Technology is Neutral
Why do global regulators fear public blockchains? The core issue is the ambiguity of accountability. However, as highlighted in the OMFIF report, attempts to regulate the protocol layer itself are logically impossible and inappropriate.
Absence of an Accountable Entity: Traditional financial regulation is structured around holding a centralized operator legally liable. In a decentralized public blockchain, there is no single entity to license or sue. It is akin to attempting to drag the Bitcoin network itself into a courtroom.The Nature of Technology: A blockchain protocol is merely a technology, analogous to a physical ledger book. Just as we do not regulate the paper and pen used for accounting as financial infrastructure, regulating the protocol is a category error. Furthermore, blockchain is a General Purpose Technology (GPT) not limited to finance; designating it exclusively as financial market infrastructure is a flawed approach.Impossibility of Contractual Relations: A blockchain is not a "third-party service provider" with whom a bank signs a contract. Using a public blockchain is a permissionless act, devoid of any contractual premise. Therefore, applying traditional outsourcing regulations or vendor oversight frameworks is fundamentally impossible.
1.4 Regulate the Act, Not the Technology
Ultimately, the answer to "Can we regulate a decentralized protocol?" is clear: "No." Technology is a tool, not a subject capable of bearing legal liability.
Therefore, the regulatory focus must pivot from the technology (Protocol) to the actors utilizing that technology to provide financial services—specifically, Financial Institutions and Token Issuers. Technology has evolved. It is now possible to have a chain that is public yet has vetted validators, and open yet allows for asset control. While regulators scrutinize the Architecture, ignoring the Functionality, the opportunity cost of financial innovation continues to mount.
The question must change. It is no longer "Which chain are you using?" but "Can the Issuer execute compliance functions (AML, Sanctions, Asset Freezing) on that chain?" The regulatory focus must shift from the form of the infrastructure to the function of the infrastructure.
This paradigm shift presents two clear mandates for market participants:
Subject of Licensing: Regulatory licenses should be granted to the 'Issuer' who mints and manages assets on the network, not the network itself. Ultimate legal liability rests with the issuer, not the code.Technical Requirements: Issuers must select infrastructure that allows them to leverage the liquidity and scalability of public blockchains while simultaneously retaining the Control (Freeze, Clawback, etc.) mandated by regulators.
The ball is now in the issuer's court. Issuers face the novel challenge of exercising absolute control even on public rails. This is precisely why the XRPL—uniquely capable of meeting these demands—is emerging as a compelling choice for institutions in the era of regulated blockchain.
2. OMFIF’s 8 Compliance Requirements and XRPL’s Answer
Regulators continue to view public blockchains with a mix of apprehension and anticipation. The OMFIF report, "Driving Public Blockchain Integration in Banking", articulates this regulatory perspective, clearly defining the Functionality Requirements that public blockchains must meet to serve as infrastructure for regulated financial services.

2.1 OMFIF’s Functional Requirements
The paramount mandate of regulators is to ensure the Stability, Security, and Integrity of financial markets. If a new technology aspires to serve as the Rail for financial assets, regulators must verify whether it can achieve stability comparable to legacy infrastructure and whether it allows for oversight and legal enforcement when necessary.
Historically, regulators feared that public blockchains were incompatible with these mandates, viewing decentralized structures as inherently uncontrollable. However, technological advancements have rendered this view obsolete. OMFIF suggests that regulators must abandon the binary fixation on "Private vs. Public" and instead establish clear, functionality-based criteria: "Can the infrastructure execute the core functions required for compliance?"
In this context, the 8 key requirements proposed by OMFIF can be interpreted as the Standard and Technical Benchmark for public blockchains entering the institutional fold.
2.2 XRPL’s Answer
Remarkably, XRPL demonstrates a design that perfectly satisfies these 8 requirements using only the Native Features of the Ledger itself, without the need for complex, custom smart contract development. This proves that XRPL was purpose-built for institutional finance from its inception.
2.2.1 Asset Control
Regulatory Requirement: The most critical requirement is that the issuer must retain control over their assets. Issuers must be able to immediately Freeze assets in specific accounts to comply with court orders or regulations, Clawback funds involved in crime or errors, and Authorize only white-listed wallets (KYC-compliant) to hold assets.XRPL Solution: While other chains like Ethereum place the burden entirely on developers to build and audit bespoke smart contracts (e.g., ERC-1404) to achieve this, XRPL provides these control capabilities as Native Features embedded directly in the Ledger. This minimizes the potential for code errors and guarantees compliance enforcement immediately at the protocol level. Specific implementation methods (IOU/MPT) are detailed in Section 3.
2.2.2 Settlement Finality
Regulatory Requirement: For capital markets to function, Legal Settlement must be guaranteed. Technically, this requires Deterministic Finality—where transactions are immediate and irreversible—rather than probabilistic assurance. A "transfer that could be reversed in 10 minutes" is unfit for finance.XRPL Solution: Unlike the 'Probabilistic Finality' of Bitcoin, XRPL utilizes a unique Consensus Protocol (derived from FBA) to deliver Deterministic Finality. All transactions are either fully confirmed or rejected within 3–5 seconds. Once recorded on the Ledger, a transaction is immutable and can never be reversed via forks or rollbacks. This provides the technical guarantee of Settlement Certainty demanded by financial institutions.
2.2.3 Operational Resilience
Regulatory Requirement: Financial infrastructure must never go down, regardless of hacks or natural disasters. A decentralized architecture with No Single Point of Failure (SPoF) and high Uptime is mandatory.XRPL Solution: Since its inception in 2012, XRPL boasts the most stable uptime record among major public blockchains over 12+ years. Even amidst massive spam attacks and load tests, it has maintained transaction integrity without a single ledger rollback or asset loss, proving its Enterprise-Grade Security.
2.2.4 Confidentiality
Regulatory Requirement: While transparency is a virtue of public blockchains, the full exposure of institutional portfolios or customer privacy is unacceptable. Regulators demand a balance between transparent verification and the protection of sensitive information.XRPL Solution: XRPL is currently developing Confidential MPT utilizing Zero-Knowledge Proof (ZKP) technology, slated for release in Q1 2026. This allows third parties to verify transaction validity while encrypting sensitive data like amounts and balances. Additionally, compliance-ready DID (Decentralized Identity) solutions enable on-chain identity verification without exposing personal data.
2.2.5 Throughput & Fee Stability
Regulatory Requirement: Financial infrastructure requires high throughput and, crucially, Cost Predictability. A network where gas fees can spike to dozens of dollars due to market volatility is fatal for corporate business models.XRPL Solution: XRPL adopts a burn-fee model to prevent spam, maintaining negligible fees (approx. 0.0002 XRP per tx) even compared to other mainnets. Despite high performance (thousands of TPS), fee volatility remains low, allowing corporations to accurately forecast and manage operational costs.
2.2.6 Validator Screening
Regulatory Requirement: Node operators validating financial transactions must not be linked to sanctioned nations (e.g., North Korea) or criminal organizations. Regulators want to know "Who is validating my transaction?"XRPL Solution: XRPL employs a Unique Node List (UNL) structure for its consensus. Network participants explicitly select a list of trusted validators (UNL) to participate in consensus. This approach differs from PoW's reliance on anonymous miners, securing validator identity and trust while maintaining the openness of a public blockchain.

2.2.7 Interoperability
Regulatory Requirement: Issued assets must not be trapped in a specific chain (Vendor Lock-in). They must connect freely with other networks and legacy systems to secure liquidity.XRPL Solution: XRPL guarantees free asset movement through partnerships with interoperability solutions like Axelar and Wormhole. Notably, the Native DEX embedded in the Ledger supports instant exchange between external bridged assets and native assets, providing RWA issuers immediate access to global liquidity.
2.2.8 Accountability & Governance
Regulatory Requirement: Critical network upgrades or changes must not be decided unilaterally by a small group of developers. Clear decision-making structures and accountability are required.XRPL Solution: XRPL transparently determines protocol changes through the Amendment Process. Changes are applied only after sustaining 80% validator consensus for two weeks, with the entire process visible on-chain. This prevents radical changes that could compromise stability and realizes responsible governance based on ecosystem consensus.

3. XRPL’s Unique Tech Stack: Built for Compliance
XRPL goes beyond merely meeting the 8 OMFIF requirements; it possesses a proprietary technology stack that is "Built for Compliance" by design. Crucially, these capabilities are provided as Native Features embedded directly into the Ledger, rather than relying on developers to code complex smart contracts from scratch.
While smart contracts offer high flexibility, securely implementing financial compliance functions significantly expands the developer's scope of responsibility, demanding exorbitant security audit costs and resources. In contrast, XRPL allows developers to invoke battle-tested native features using familiar languages (SDKs like Python, Java, JavaScript). This not only helps enterprises internalize blockchain technology rapidly and cost-effectively but also drastically mitigates the risk of human error or hacks through safety mechanisms verified at the protocol level.
3.1 XRPL’s Solution I: Embedded Compliance
Institutions often default to private blockchains for 'Control'. XRPL offers a technological breakthrough: it maintains the openness of a public blockchain while granting issuers the granular control typical of private ledgers.
3.1.1 Native Token Standards for Compliance
XRPL offers two robust token standards—IOU (Issued Currency) and MPT (Multi-Purpose Token)—to meet diverse institutional needs. Both support regulatory functions at the ledger level but offer distinct advantages in Liquidity vs. Management Ease.
1) Proven Liquidity & Speed: IOU (TrustLine Token) The IOU standard has been the backbone of XRPL, powering the majority of DEX and AMM liquidity. It is ideal for projects where immediate secondary market trading is paramount.
Regulatory Features: Despite being a foundational standard, it supports the RequireAuth flag to restrict TrustLines to authorized (KYC’d) users. It also enforces GlobalFreeze and Clawback to comply with regulatory mandates.Characteristics: Investors must sign a TrustLine to receive assets. While a strong anti-spam measure, this can present a UX friction point for mass retail distribution.
2) Next-Gen Standard for RWAs: MPT (Multi-Purpose Token) MPT is the modern standard designed to inherit IOU’s compliance features while enhancing flexibility and data integrity for RWAs. It is poised to become the Gold Standard for institutional RWAs.

Frictionless UX & Metadata: MPT innovation eliminates the need for TrustLines, enabling immediate asset distribution. Crucially, it supports up to 1024 bytes of Metadata, optimized for STOs that require on-chain recording of legal documentation or securities filings.Sophisticated Control: Issued in specific units, MPT allows issuers to pre-define Transferability, Locks, and Clawback rules at issuance. This automates complex compliance logic without a single line of smart contract code.
Conclusion: By offering both "Immediate Tradable Liquidity (IOU)" and "Frictionless Regulated Asset Distribution (MPT)," XRPL provides issuers with an optimized infrastructure strategy tailored to their regulatory environment and Go-to-Market goals.
3.1.2 Deterministic Finality: Aligning Legal & Technical Settlement
In finance, 'Settlement' must be irreversible. Bitcoin or Ethereum’s Probabilistic Finality implies a theoretical risk of rollback. XRPL delivers Deterministic Finality via its unique consensus algorithm. Transactions are 100% confirmed or rejected within 3–5 seconds, and once confirmed, are immutable. This perfectly satisfies the market’s requirement for Technical Settlement to mirror Legal Settlement.
3.1.3 Operational Predictability: Zero Gas Volatility & Accounting Clarity
Unpredictable costs are a major barrier to enterprise adoption. Chains where gas fees spike 100x during congestion make budgeting impossible. XRPL employs a burn-fee model to prevent spam, maintaining fees at negligible levels (approx. 0.0002 XRP). This low and stable fee structure allows enterprises to forecast transaction costs and maintain clear accounting records.
3.2 XRPL’s Solution II: Openness (Not Isolation)
Private blockchains offer 'Control' at the cost of 'Isolation', leading to Vendor Lock-in and stifled innovation. XRPL resolves this issue by technically implementing 'issuer-level asset control' directly on public infrastructure. It offers the unique differentiation of providing private-chain levels of issuer control within a public ecosystem of deep liquidity.
3.2.1 Native Infrastructure: Instant Access to Decentralized Markets
Unlike chains reliant on third-party dApps (e.g., Uniswap), XRPL features a Native DEX (Central Limit Order Book) and AMM embedded directly in the protocol. This means issued RWAs (bonds, equities) can be traded globally immediately upon issuance, without listing fees or liquidity pool fragmentation. Institutions gain instant access to global liquidity infrastructure.
3.2.2 Liquidity Integration: Pathfinding & Auto-Bridging
Standard DEXs suffer from fragmented liquidity; without a direct 'Token A - Token B' pool, trading is impossible or inefficient. XRPL solves this via protocol-level Pathfinding.
Optimal Path Discovery: The ledger automatically finds the most efficient route (e.g., A -> XRP -> B, or A -> C -> B) even if a direct pair doesn't exist.Auto-Bridging: Leveraging XRP as the bridge currency, the protocol utilizes XRP’s deep liquidity to facilitate trades between illiquid assets seamlessly.

Atomicity: These complex multi-hop trades are executed as a single Atomic Transaction (All-or-Nothing). Users experience a definitive trade equivalent to Legal Settlement without the risk of partial execution or slippage mid-trade.
These capabilities aggregate fragmented liquidity to maximize trading efficiency.
3.2.3 Open Innovation: Ecosystem without Vendor Lock-in
Private chains risk locking institutions into a specific vendor's technology stack. XRPL is an open-source public blockchain supported by a global developer community. Institutions can freely choose from a diverse array of wallets, custody solutions, and analytics tools that adhere to XRPL standards, ensuring the long-term sustainability and innovation of their financial infrastructure.
4. Mass Adoption and Institutional Growth
Beyond theoretical compliance capabilities, XRPL is entering a phase of mass adoption, proving its utility in live financial markets.
4.1 Proof Point: RLUSD Issuance under NYDFS Regulation
The most compelling evidence is Ripple's upcoming stablecoin, RLUSD. RLUSD is regulated by the New York Department of Financial Services (NYDFS), widely regarded as the strictest crypto regulator globally. The fact that RLUSD is issued on XRPL serves as an official endorsement that XRPL’s technical infrastructure (Freeze, Clawback, Transparency) meets the highest tier of financial regulation. This decisively shatters the market misconception that "public blockchains cannot be compliant."
4.2 Asset Expansion and the Future of Institutional Finance
Building on XRPL’s compliance features and embedded liquidity hubs (DEX), the tokenization of diverse financial instruments is accelerating.

Tokenized Treasuries & Bonds: Implemented as IOUs (Debt Certificates) specifying the issuer's payment obligations. Complex logic such as interest payments, maturity redemption, and early repayment can be safely handled, while MPT’s whitelist feature enforces distribution solely to Accredited Investors.MMFs & Derivatives: As demonstrated by projects like OpenEden tokenizing T-Bills on XRPL, institutions will leverage XRPL’s low fees and instant settlement to launch on-chain financial products with efficiency vastly superior to legacy finance.Real Estate & High-Value Asset Liquidity: The recent case of the Dubai Land Department (DLD) is particularly notable. DLD selected XRPL as the infrastructure for the Middle East’s first government-backed real estate title tokenization pilot. Unlike previous experiments limited to digital certificates, this project with Ctrl Alt updates Dubai’s official land registry database in real-time upon trading fractional ownership tokens on XRPL. This signifies that on-chain transactions achieve immediate Legal Finality in the real world, proving XRPL can function as a legally binding RWA infrastructure fully integrated with national administrative systems.
5. The Stage is Set for Institutional Adoption
Until now, the financial sector has been trapped in a dilemma: choose between "Isolated Private Blockchains for Security" or "Innovative but Risky Public Blockchains." However, the OMFIF report and recent market shifts signal the end of this outdated dichotomy. The essence of regulation has shifted from the Form of Infrastructure to the Actual Control Functions exercisable by the issuer.
XRPL provides the optimized answer to this new paradigm, satisfying OMFIF’s 8 requirements via native ledger functions without smart contract risk. Through its dual strategy of IOU and MPT, issuers can select between 'Instant Liquidity' and 'Sophisticated Compliance' as needed. Real-world integration with legal finality, as seen in the Dubai DLD case, is already a reality.
Ultimately, the XRPL stands as the most realistic alternative for institutions, capable of simultaneously delivering the 'innovation' of public blockchains and the 'control' of private chains. As the regulatory tide rises, the value of XRP and the XRPL—as infrastructure already built for compliance—will only become more distinct.

Key Sources
BIS - SCO60 Cryptoasset exposures
OMFIF - Driving public blockchain integration in banking
XRPL Docs - Creating an Asset-backed Multi-purpose Token
XRPL Docs - Real World Asset (RWA) Tokenization
XRPL - The Future of Asset Tokenization
Messari - State of XRP Ledger Q3 2025
GFMA - Prudential treatment of cryptoassets exposures
WHITE & CASE - CRR III, Prudential treatment of crypto exposures
ISDA - Joint Trades Submit Letter to BCBS Calling for Recalibration of Cryptoasset Prudential Standards
Ctrl Alt - Ctrl Alt and Dubai Land Department go live with tokenized real estate
Ctrl Alt - Ripple Partners with Ctrl Alt to Support Real Estate Tokenization in Dubai

Axelar Network supports the integration of stablecoins into institutional financial infrastructure by enabling the consistent handling of stablecoins from diverse issuers and chains within regulatory, accounting, and risk frameworks.

1. Introduction: Challenges Facing Stablecoin Infrastructure
Stablecoins have already become a core component of the crypto market, but they remain challenging assets for financial institutions. The issuance structure, regulatory jurisdiction, settlement methods, and accounting standards differ between issuers and chains, making it difficult to integrate seamlessly into existing financial systems.
The focus of discussions so far has primarily been on the question, “Which stablecoin is safer?” However, the real question from a financial institution’s perspective is somewhat different:
“Can stablecoins traded across multiple issuers and chains be handled consistently within regulatory, accounting, and risk frameworks?”
Rather than issuing new stablecoins directly, Axelar aims to provide an infrastructure-level solution to this question. Without issuing stablecoins or performing KYC/AML, and while leaving the issuance responsibility to banks, custodians, and VASPs, Axelar serves as a non-issuing interchain infrastructure layer that facilitates cross-chain circulation, settlement, and state synchronization.
This report outlines Axelar’s structure from the perspective of financial institutions across the following three areas:
How can regulatory, accounting, and settlement requirements be addressed?What structural differences exist compared to existing stablecoin infrastructures?How can it be applied in scenarios for financial institutions, custodians, and payment gateway (PG) providers?
1.1 The Need for Interoperability from a Financial Institution Perspective
The current stablecoin ecosystem is a typical many-to-many structure. Multiple issuers issue and circulate stablecoins on various public chains, with different bridge structures and security levels across each chain.
For individual investors, this might seem like a simple matter of switching chains. However, for financial institutions, the questions become:
Given that each issuer has a different reserve, redemption structure, and regulatory jurisdiction, can these assets be managed within the institution’s policy and accounting framework?With different bridges and token standards on each chain, can settlement and redemption patterns be standardized?
Thus, interoperability is a critical requirement for extending regulatory, settlement, and accounting frameworks to a multi-chain environment, beyond simply the ease of cross-chain transfers and exchanges.
1.2 Constraints Imposed on Financial Institutions by the Lack of Interoperability
In the absence of sufficient interoperability, financial institutions face four main constraints:
Fragmentation of Payments and Circulation
The circulation path is fragmented by issuer and chain, so stablecoins do not function as “digital cash universally accepted everywhere,” but rather as a “value unit confined to a specific network.”Possibility of Accounting and Settlement Discrepancies
In multi-chain transactions, it is difficult to record on-chain balances, reserves, and burn records along a single timeline, which becomes a continuous burden in internal reconciliation and external audits.Difficulty in Classifying Cash Equivalents
Due to the lack of standardized patterns to prove redemption capability, liquidity, and control, most stablecoins are classified as financial products (IAS 32), making them difficult to use as short-term liquid assets for corporations and banks.Fragmentation in Circulation and Risk Management
Issuance vs. circulation, chain-to-chain movement, and redemption history are scattered across different bridges, chains, and protocols, making it difficult to design consistent AML monitoring, sanctions risk management, and key risk indicators (KRIs).
To resolve these constraints, stablecoins need to transition from being “limited exchange tools within the blockchain ecosystem” to being integrated into institutional financial infrastructures.

2. Blockchain Adoption Requirements from a Financial Institution Perspective
When financial institutions assess blockchain and stablecoin infrastructures, they focus on three main criteria:
Regulatory Acceptance and Role SeparationSecurity and PrivacyRisk Management and Monitoring
Interchain infrastructures like Axelar must meet these three requirements to be adopted by financial institutions, irrespective of their technical excellence.
2.1 Regulatory Acceptance and Role Separation
Regulators and financial institutions are highly concerned about structures where responsibilities are unclear. It must be clearly defined who the issuer is, who the infrastructure provider is, and where the responsibility for KYC/AML and redemption agreements lies.
Issuer (Bank, Custodian, VASP)
Financial institutions are responsible for managing reserves, licenses, KYC/AML, and redemption agreements.Infrastructure Provider (e.g., Axelar)
A technology layer that executes and synchronizes issuer decisions across chains.
This issuer-infrastructure role separation:
Clarifies responsibility for regulators.Provides financial institutions with a structure where the regulatory framework remains intact even if the underlying technological infrastructure changes.
2.2 Security and Privacy
The security requirements from financial institutions go beyond simple protection against hacking.
Anomaly detection and conditional executionAddress whitelisting and limit-based approval policiesAuditability for all settlement and redemption flows
Simultaneously, personal information should remain off-chain. MAS and WEF recommend storing personal data off-chain and only storing hashes, reference IDs, and zk-proof on-chain.
Thus, financial institutions need an infrastructure where:
“On-chain states and off-chain KYC information are clearly referenced from the design stage.”
2.3 Risk Management and Monitoring
Adopting blockchain infrastructure entails establishing a new risk framework, including technological, operational, human error, and regulatory risks. A Key Risk Indicator (KRI) system that includes all these is essential.
Axelar’s strength lies in the fact that state changes and message flows between chains are recorded on-chain.
Issuance vs. circulationCross-chain movementRedemption eventsAnomalous transaction patterns
These data points can be defined as on-chain KRIs, which can be utilized in AML and sanctions risk management systems, linked to forensic tools.
From a financial institution's perspective, this is more about gaining a “new observational window where state changes can be transparently monitored” rather than introducing a separate system with difficult internal controls.

3. Structural Limitations of Existing Stablecoin Infrastructure
The current stablecoin infrastructure, separate from token design, has the following structural limitations at the infrastructure level:
Lack of Universal Liquidity
Although stablecoins exist across various issuers and chains, users must differentiate between issuers and chains, and recipients must individually assess the associated risks. As a result, stablecoins are not perceived as “digital cash universally accepted everywhere,” but rather as “different products depending on the issuer and chain.”Fragmentation of On- and Off-Ramps
Each issuer and chain has its own separate on- and off-ramp. Banks, payment gateways (PG), and fintech companies must each develop different bridge and settlement logic, and the same types of risks and operational costs are repeated across chains.Transfer of Credit and Accounting Risk to the Recipient
Corporations and banks must analyze the reserve composition, legal strength of redemption agreements, and regulatory jurisdiction each time they receive stablecoins. Due to the lack of standardized patterns for classifying stablecoins as cash equivalents under IAS 7, they are typically treated as financial products in practice.Difficulty in Integrating Issuance, Circulation, and Redemption Flows
While tracking is possible within a specific chain, it becomes difficult to create a global view of issuance vs. circulation, burn history, and settlement timing when considering a multi-chain, multi-bridge environment. This poses obstacles in accounting audits, regulatory reporting, and internal risk management.
Due to these limitations, while stablecoins can be used as convenient blockchain-based payment methods, they are not yet recognized as a "digital asset infrastructure with the same level of trust as institutional payment and settlement infrastructure."

4. Axelar: A Regulatory-Compliant Interchain Infrastructure for Financial Institutions

4.1 Axelar as a Non-Issuing Interchain Infrastructure Layer
Axelar does not issue stablecoins. Instead, it aims to connect various issuers, chains, and applications on a common interoperability infrastructure.
The core points are as follows:
• The responsibility for issuance, KYC, reserves, and redemption remains with the financial institution (issuer).
• Axelar handles cross-chain state synchronization, message routing, and token movement.
In other words, Axelar serves as a “non-issuing interchain infrastructure layer” that provides a structure capable of technically accommodating the regulatory, accounting, and settlement requirements demanded by financial institutions.
4.2 Interoperability Models Based on GMP, ITS, and AVM
Axelar's technology stack can be divided into three main layers:
1. GMP (General Message Passing)
It conveys settlement-related events such as redemption requests, approvals, settlement instructions, and burn reports as messages.It enables the repeated pattern of “redemption request → message creation and verification → execution on the destination chain.”
2. ITS (Interchain Token Service)
Issues a single stablecoin across multiple public chains but prevents asset duplication through a Burn-and-Mint structure.The issuer controls the total supply and the circulation amount per chain, while users experience the same asset on any chain.
3. AVM and Private-Public Bridge (MDS, Interchain Amplifier)

Connects private chains and public chains while implementing access control, policy insertion, and data transformation logic via smart contracts.Sensitive data remains on the private chain, and only necessary proofs and reference values are made public on the public chain, following the MAS INM (Information Management) principle.
From the perspective of financial institutions, Axelar is a “technology layer that integrates issuers, chains, and applications into a unified interoperability pattern.”

5. Axelar Utilization Models from a Financial Institution Perspective

The value of Axelar becomes clearer in specific scenarios. Three primary utilization models can be considered:
Overseas Issued Stablecoin Receipt and RedemptionDomestic Bank-Issued StablecoinCustody and Payment Gateway (PG) Provider Model
5.1 Overseas Issued Stablecoin Receipt and Redemption
Imagine a situation where a domestic bank receives and redeems overseas issued stablecoins on behalf of its customers. A useful approach here is the Collection Processing Model. The overseas issuer's deposit is not finalized in the customer’s account until it is actually deposited into the domestic account. Instead, the bank collects the funds from the overseas issuer on behalf of the customer. In this case, without the need for a new license, it can be operated within the existing foreign exchange law framework.

In this scenario, Axelar can verify the token burn and reserve movement on-chain in the overseas chain and deliver the results to the domestic bank via GMP messages. The bank can then execute payments in KRW or foreign currency based on this message and account for the "redemption completion." Although a public chain is used, this is not an outsourcing of foreign exchange tasks to a third party but rather defines the use of a public network for the financial institution’s internal settlement and redemption procedures.
5.2 Domestic Bank-Issued Stablecoin
The second model is where a domestic bank issues its own stablecoin. Based on its own reserves and redemption agreements, the bank designs a stablecoin and registers it with Axelar ITS, enabling immediate integration with multiple public chains. Customers and businesses can receive the same stablecoin on their preferred chains, and cross-chain movements are handled via the Burn-and-Mint structure.

The key to this structure is that the total supply, chain-specific circulation, and redemption history are always managed in a consistent pattern. Once the process of redemption request → inter-chain messaging → burn on the origin chain → payment to accounts is standardized, it will provide a clearer proof pattern for "redeemability, liquidity, and controllability" when discussing IAS 7 cash equivalent requirements.
5.3 Custody and Payment Gateway (PG) Provider Model
The third model involves custodians and PG providers. Custodians can integrate and manage stablecoin positions scattered across various chains via a multi-chain wallet infrastructure linked to the Axelar network. By standardizing the redemption, burn, and deposit processes between issuers, custodians, and banks with a GMP/ITS-based workflow, a settlement structure that is transparent and auditable for customers, institutions, and regulators.
For PG and payment providers, stablecoin payments from various chains can be aggregated through Axelar into a single settlement channel. By automating settlement, redemption, and reporting between PGs, issuers, and banks based on messages, each player can extend the system by sharing Axelar as a common interchain settlement network, rather than operating separate bridges.

6. Axelar-Based Response Structure from the Perspective of Accounting, Regulation, and Settlement

Axelar does not directly hold reserves or execute redemptions. Nevertheless, it can provide proof patterns that technically support accounting, regulatory, and settlement frameworks.
6.1 IAS 7 Cash Equivalent Requirements
To be recognized as a cash equivalent under IAS 7, stablecoins must meet three conditions:
RedeemabilityLiquiditySegregated Custody and Risk Control
While Axelar does not directly satisfy these conditions, it provides data and patterns that can demonstrate compliance with each requirement:
Redeemability
Redemption requests are recorded as on-chain messages, and tokens are burned on the origin chain via ITS. The structure ensures a 1:1 match with off-chain account payments.Liquidity
Axelar provides redemption channels that can process redemption and repurchase procedures quickly across multiple chains, reinforcing the "quick and easy cash conversion" claim.Segregated Custody and Risk Control
The issuance vs. circulation, redemption history, and cross-chain movement are all recorded on-chain, making them useful as evidence in accounting audits and risk management.
As a result, Axelar abstracts the redemption and settlement procedures for stablecoins into a consistent workflow and leaves all events as verifiable data. This fulfills the transparency and traceability requirements for redemption mechanisms as demanded by financial institutions.
6.2 Foreign Exchange Regulation and Capital Transaction Reporting
From the perspective of foreign exchange and capital transaction regulation, the key is to clearly explain: “Who sent funds to whom, for what purpose, and through which route?” Axelar’s GMP provides a structure where KYC reference keys, transaction purpose codes, country codes, amounts, and other foreign exchange reporting data can be included in the message metadata. When integrated with existing foreign exchange reporting systems, this enables a seamless connection between on-chain redemption/settlement events and off-chain reporting systems.
In the Collection Processing Model, the flow of token burning, reserve movement, and domestic account payments from an overseas chain is consolidated into a single pattern. In this case, Axelar is responsible for cross-chain state verification and asset matching, while the bank uses this information to perform foreign exchange and capital transaction reporting. The use of a public blockchain is not outsourcing foreign exchange tasks to a third party, but rather an opportunity for the bank to utilize public infrastructure with its internal capabilities.
6.3 Automated Settlement System
In traditional finance, settlement refers to the final stage of a transaction, where the ownership of assets is transferred. The same applies to blockchain:
Token issuance, burning, and movementAccount balances and accounting records are updatedIrreversibility (finality) is secured
Axelar does not perform the settlement directly. Instead, it modularizes the three stages necessary to enable settlement:
Settlement Trigger
A settlement trigger is initiated by the issuer, PG, or custodian system.Message Creation and Verification
Axelar Gateway generates the relevant message, which is verified by Axelar validators on the chain.Execution on the Destination Chain
The smart contract on the destination chain executes the message, burning tokens, updating balances, and storing the settlement record.
Through this process, financial institutions can consistently verify that cross-chain settlement has been properly executed, and the same data can be used as a common foundation for accounting, risk, and regulatory reporting.

7. Conclusion: Axelar’s Role and Implications in the Stablecoin Infrastructure

Existing discussions surrounding stablecoins have largely focused on structural comparisons, such as “which stablecoin is safer.” However, from a financial institution's perspective, the more important question is:
“Can stablecoins, incoming from different issuers and chains, be processed consistently within existing regulatory, accounting, and risk frameworks?”
Axelar provides an infrastructure-level solution to this question. Axelar is not itself an issuer of stablecoins, nor does it replace the role of financial institutions in performing KYC/AML. Instead, Axelar executes the entire process of "issuance – circulation – redemption – settlement – accounting" through a modular infrastructure, consisting of GMP, ITS, and AVM, within a single workflow pattern.
This abstraction is highly significant for financial institutions, which need to ensure compliance with institutional standards such as MAS's INM regulations, IAS 7's definition of cash equivalents, and foreign exchange and capital transaction reporting systems. By providing a unified on-chain interoperability layer, Axelar allows for the implementation of consistent regulatory and accounting flows without the need to individually interpret the different rules and message processing methods on each chain, the risks of each bridge, or the varying redemption structures of issuers.
Therefore, the infrastructure provided by Axelar goes beyond simple cross-chain functionality, serving as the foundational infrastructure that meets the regulatory compliance, risk management, and accounting consistency required by financial institutions in a multi-chain stablecoin era. This structure aligns naturally with the direction needed for stablecoins to be integrated into institutional financial infrastructure. Simultaneously, Axelar presents a practical and actionable path to make stablecoins’ institutional application a reality.

Key Source
Axelar – Official Homepage
Axelar - Why Decentralization Matters for Your Institutional Blockchain Strategy
Interop Labs - Responses to Specific RFI Questions
Introducing the Axelar Virtual Machine: Supercharging Interchain Development
What Is General Message Passing and How Can It Change Web3?
Interlinking Networks Technical Whitepaper
Building Multichain Stablecoins: Part One
GAAP : Corporate Accounting Standards Briefing
The Future of Wealth Management
Sub Source
Capital Market Research Institute – Global Stablecoin Systems and Usage Status
Capital Market Research Institute – Economic Implications and Policy Insights of Stablecoin Issuance
Axelar - English Whitepaper

Global enterprise adoption of XRP, including Evernorth and VivoPower, is accelerating. We analyze the strengths of XRP’s structural deflation and how it serves as a key incentive for Digital Asset Treasury (DAT) adoption.

1. Introduction: Tokenomics, The Latent 'Accounting Barrier' to Adoption
1.1 The Acceleration of Institutional Adoption
The defining narrative of the 2024 crypto market was 'Institutional Adoption'. With the launch of major spot ETFs (BTC, ETH) by asset management titans like BlackRock and Fidelity, cryptocurrency has taken a decisive step into the institutional fold of Wall Street. This is a clear bullish signal that strengthens the market’s underlying price fundamentals.
However, we need to draw a critical distinction: does this signal the peak of institutional adoption, or is it merely the opening act? The ETF structure reflects the 'Asset Manager (AM)' model, where assets are simply added into investment portfolios. This produces a ‘caged’ form of adoption, in which assets sit idle in custodial cold wallets, contributing negligible value to on-chain activity. While prices have appreciated, on-chain growth failed to mirror this explosive momentum.
The market is now pivoting to the next evolutionary phase: the DAT (Digital Asset Treasury) model, where institutions utilize assets not merely for investment, but as active 'Treasury Assets'. As demonstrated by MicroStrategy and Evernorth (XRPN), this represents an ongoing trend of 'integration'—embedding assets directly into corporate payment flows, liquidity management, and collateral frameworks. Whereas ETFs institutionalized price exposure, DAT institutionalizes the network layer itself, directly accelerating the growth of network fundamentals.
1.2 Tokenomics as Accounting Policy
However, this nascent DAT trend encounters a formidable hurdle absent from the ETF model: 'Accounting Complexity'.
For corporate treasury teams and audit firms, 'Tokenomics' (issuance, burn, rewards) is not a speculative variable but a strict 'Accounting Standard'. If an asset possesses a fluid total supply (e.g., ETH, SOL) or generates unpredictable interest income (staking), it immediately becomes a potential 'Balance Sheet Risk' once recognized on financial statements.
This report provides an in-depth comparative analysis of the tokenomics of three major assets—ETH, SOL, and XRP—viewed through the lens of 'Financial Audit'. Ultimately, only assets capable of overcoming this 'Accounting Barrier' will emerge as the victors of true 'Economic Adoption'.

2. Comparative Analysis of Monetary Policy (ETH vs. SOL vs. XRP)
From the perspective of a corporate treasury, an asset's monetary policy (tokenomics) is evaluated based on two critical metrics: 'Predictability' and 'Accounting Clarity'. Under these criteria, ETH, SOL, and XRP exhibit fundamentally distinct architectural designs.
2.1 ETH: Policy-Driven Deflation
Following 'The Merge' and the transition to Proof-of-Stake (PoS), Ethereum adopted a 'Policy-Driven Deflation' model. While structurally inflationary, it is designed to 'induce' deflation during operational phases.
Issuance (Inflationary Factor): New ETH is continuously minted to reward validators.Burn (Deflationary Factor): Under EIP-1559, a portion of the base transaction fee is automatically burned.
Consequently, deflation occurs only when 'Burn Rate > Issuance Rate'. Conversely, if network activity cools, the asset can revert to an inflationary state. In essence, ETH’s deflation is a 'managed outcome' dependent on market variables, not a guarantee enforced at the code level.
2.2 SOL: Controlled Inflation
Solana operates under a 'Controlled Inflationary' model. The design focus is not on deflation, but on 'controlling' the inflation rate within a predictable range.
Issuance (Inflationary Factor): The schedule begins with ~8% annual inflation, designed to decay by 15% annually until stabilizing at a terminal rate of 1.5%–2%.Burn (Inflation Suppression): Approximately 50% of transaction fees are burned to lower the Real Inflation Rate.
While this model offers a degree of predictability, it fundamentally imposes the burden of holding an asset subject to continuous value dilution on the corporate balance sheet.
2.3 XRP: Structural Deflation
Unlike ETH and SOL, XRP was engineered as a 'Structurally Deflationary' asset. This model is not an 'operational' outcome subject to policy shifts, but a 'guarantee' enforced at the protocol level.
Issuance (Mechanically Precluded): Following the initial creation of 100 billion tokens, no capability for additional issuance exists within the code. The periodic release of Ripple’s escrow represents the circulation of the existing supply, not the minting of new supply.Burn (100% Execution): The protocol does not mint new tokens for validator rewards. Instead, 100% of all transaction fees generated on the network are permanently burned.
The XRP supply curve operates in a strictly 'monotonic decrease'. Even with zero network usage, the total supply never increases (status quo); as usage accelerates, the burn rate accelerates, driving a continuous contraction of the total supply.

3. The Crossroads of Institutional Adoption: 'AM' vs. 'DAT'
The distinct tokenomics analyzed in Section 2 create a fundamental divergence in market entry strategies. Institutional adoption exists in two disparate models with radically different impacts on the underlying network.
3.1 Comparative Analysis of Models
Asset Manager (AM) Model: Centered on 'Price Fundamentals'
The AM Model (e.g., ETFs by Bitwise, BlackRock) primarily serves to incorporate digital assets into 'Investment Portfolios'.
While capital inflows are substantial, assets remain dormant in custodial vaults with zero on-chain activity. There is negligible contribution to transactional throughput or fee generation. The impact is confined to the Secondary Market, strengthening "Price Fundamentals" while leaving "Network Fundamentals" untouched.
Digital Asset Treasury (DAT) Model: Centered on 'Network Fundamentals'
The DAT Model (e.g., MicroStrategy, Evernorth) instead classifies the asset as 'Treasury Assets'. This implies a strategic "integration of assets into the corporation's payment, liquidity, collateral, and accounting systems." In this model, the asset is utilized directly on-chain (payments, collateralization, stablecoin settlement). It creates a direct link with custody and treasury infrastructure (Ripple Custody, GTreasury), fostering a bidirectional integration between the issuer and the network. This structure directly fuels the "Economic Activity of the Network."

3.2 The Limitations of the AM Model
We can empirically observe the limitations of the AM model (ETFs) through data. Comparing capital flows post-ETF approval against network activity reveals a decoupling: "Price and Valuation appreciated (A → B), but the Ecosystem did not grow (A ≠ C)."
This proves that the AM model successfully 'cages' assets within custodial silos but fails to translate into 'Substantive Utilization' of the network.
3.2.1 ETF Inflows: The Primary Driver of Price (A → B)

Following the BTC ETF approval in January 2024, the green bars (Net Flows) indicate a sustained and massive influx of institutional capital.
Analysis: This liquidity injection was the direct catalyst driving BTC price (Black Line) to new All-Time Highs (ATH). It is proven that "Institutional Capital (A) drives Price (B)."
3.2.2 Active Addresses & Transactions: The Stagnant Network (But A ≠ C)
However, when pivoting from 'Price' to 'Native Network Activity', the narrative shifts. Despite the price explosion, Real User Metrics (Active Addresses) and Activity Metrics (Transactions) have stagnated.

Active Addresses: While price charted an upward trajectory, the number of Active Addresses (Orange Line)—a key proxy for genuine user activity—has either declined or remained range-bound. This suggests new capital represents 'passive investors' existing only as off-chain ledger entries, not 'active users' creating on-chain wallets.

Transactions: Transaction counts, representing on-chain economic activity, have failed to track the price appreciation. Spikes in certain intervals were attributed to isolated events (e.g., Ordinals/Runes), while the broader trend remains flat.
These data points converge on a single conclusion: ETFs brought assets into the regulatory mainstream, yet at the same time have confined them within custodial vaults, effectively isolating them from the on-chain ecosystem. This phenomenon—price appreciation amidst network silence—demonstrates why we must evolve beyond simple 'Price Investment (AM)' toward a 'Real On-Chain Economic Model (DAT)'.
3.3 The Barrier to DAT Adoption: Accounting Complexity
Unlike the AM model, the DAT model represents 'Fundamental Adoption' that directly grows the network. However, the primary hesitation for institutions is not technological limitations. It is a formidable barrier absent in the AM model: 'Accounting Complexity'.
When attempting to place assets with 'Variable Tokenomics' (like ETH or SOL) on the balance sheet, treasury teams encounter three critical hurdles:
1. Valuation Uncertainty Corporate assets must be valued based on a definitive total supply. However, variable models where inflation (issuance) and deflation (burn) occur simultaneously in real-time make it difficult to determine 'Fully Diluted Value (FDV)'. Fluctuations in total supply alter the equity value of tokens held by the corporation, thereby degrading the reliability of financial statements.
2. Difficulty in Revenue Recognition While staking rewards offer attractive yield, they represent a significant accounting risk. Rewards generated with every block (e.g., every 12 seconds for ETH) can each be considered a 'Taxable Event'. Marking-to-market thousands of micro-transactions in real-time for revenue recognition and tax calculation imposes an immense load on corporate ERP (Enterprise Resource Planning) systems.
3. Audit Risk The highest hurdle is external audit. Audit firms sign off only when asset flows and balances are 'verifiable'. However, complex burn mechanisms and variable staking yields make it difficult to establish a clear 'Audit Trail'. This leads to the critical risk of receiving a "Disclaimer of Opinion" or a "Qualified Opinion."
Ultimately, "Accounting complexity is the highest barrier preventing mass adoption." This explains why, despite ETH and SOL dominating the ETF (Investment Product) market, their expansion into the Corporate Balance Sheet (DAT) sector remains relatively slow or confined to niche entities.

4. Ripple’s Edge: 'Designed Trust' for DAT
As identified in Section 3, the primary impediment to institutional DAT adoption is 'Accounting'. XRP’s unique architectural design confronts this 'Accounting Barrier' head-on, providing a foundation that institutions can confidently onboard onto their balance sheets.
4.1 XRP’s Solution: Accounting Clarity
The structural deflation model of XRP offers a definitive resolution to the aforementioned 'Accounting Risks'. From a treasury perspective, the core tokenomics of XRP are remarkably streamlined.
"The XRP-based DAT model is characterized by a Fixed Total Supply, Automated Burn, and the absence of staking rewards. Consequently, it is explicitly classified as a 'Non-Monetary Asset' regarding financial reporting."
This means the complex process of 'Staking Revenue Recognition' is fundamentally unnecessary. Furthermore, because the total supply moves exclusively in a 'contractionary' direction, the asset valuation process becomes extremely simplified.

4.2 Predictable Monetary Policy
Corporate treasury teams favor immutable 'Constants (Code)' over discretionary 'Variables (Policy)'. XRP is defined by the fact that "Issuance is closed, the supply cap is hard-coded, and monetary policy exists as a Constant, not a Variable."
This guarantees a 'Predictable Supply Curve' within corporate ERP (Enterprise Resource Planning) systems. Such 'Predictability' is a critical prerequisite for institutional finance—which abhors uncertainty—to accept cryptocurrency as a legitimate asset class.
4.3 Securing Legal Status: Validation of Asset Attributes
Unique attributes like XRP’s 'Structural Deflation' and 'Accounting Clarity' transcend mere technical advantages; they serve as vital grounds for determining how the asset is treated legally and institutionally. Indeed, thanks to these properties, XRP is increasingly recognized for its legal status as 'Property'.
A prime example is the recent ruling by the Madras High Court in India. In adjudicating a case involving specific cryptocurrencies, the court had to define the legal nature of seized XRP. The court explicitly declared XRP to be "Property capable of being owned and held in trust."
This ruling holds decisive implications for DAT adoption. It signifies judicial recognition that XRP is a legal asset that individuals and corporations can legally 'Own', provide as 'Collateral', and subject to 'Accounting Treatment', elevating it far beyond a speculative token.

5. From Theory to Reality: Infrastructure Expansion
If XRP is the theoretically perfect 'Asset' for accounting purposes, Ripple has engineered the 'Infrastructure' and 'Economic Ecosystem' to operationalize this asset in the real world. This represents a paradigm shift beyond mere custody—spanning investment, finance, and settlement.
5.1 Ripple’s End-to-End Institutional Stack
To ensure that 'Accounting Superiority' does not remain a theoretical concept, Ripple offers an 'All-in-One' toolkit for institutions to immediately adopt XRP as a DAT.
This is a complete, vertically integrated infrastructure where Custody, Treasury, Prime, and DAT are seamlessly interconnected.

This stack demonstrates Ripple’s strategy to eliminate every friction point in the DAT adoption journey. Institutions can acquire (Prime), securely store (Custody), and immediately integrate assets into existing financial workflows (GTreasury) within a regulated environment. The convergence of XRP’s 'Accounting Clarity' and 'Institutional Infrastructure' creates a 'One-Stop Solution' for DAT adoption.
5.2 Strategies for Ripple DAT
Beyond infrastructure readiness, Ripple is preparing for the exponential growth of the XRP DAT model through three strategic pillars: RWA, DeFi, and Utility.
5.2.1 RWA (Real World Assets)
The RWA ecosystem on XRPL has evidenced the influx of institutional capital, surging 215.3% QoQ (approx. $360M Market Cap).

OpenEden (T-Bills): Issues tokenized T-Bills backed by U.S. Treasuries. With Ripple pledging a $10M allocation, institutions can peg their holdings to secure U.S. sovereign yields.Archax (Funds): Archax, an FCA-regulated exchange in the UK, has tokenized the £3.8B Liquidity Fund of global asset manager abrdn on the XRPL. This signifies direct institutional access to core TradFi products via XRPL infrastructure.Ondo Finance (OUSG): Institutions can utilize stablecoins (RLUSD) to instantly invest in and redeem Ondo’s Short-Term U.S. Gov Fund (OUSG), maximizing capital efficiency.
5.2.2 DeFi Vision
The core value proposition of XRPL-based assets, including stablecoins, is 'Built-in Compliance'. Unlike unregulated DeFi which prioritizes anonymity, XRPL satisfies the control and transparency requirements of institutions.
Institutional-Grade Control (Clawback & Deep Freeze): Issuers can utilize Clawback to forcibly recover tokens from specific accounts upon regulatory mandate—mirroring the capabilities of traditional financial institutions. Furthermore, the Deep Freeze feature, activated in May, allows issuers to fundamentally block transactions for specific accounts, enabling robust risk management.Next-Gen Infrastructure (MPT & ZKP): XRPL is accelerating institutional onboarding with features for identity, privacy, and data management. This includes Multi-Purpose Tokens (MPT) for storing complex RWA parameters, Confidential MPTs utilizing Zero-Knowledge Proofs (ZKP), and access control via KYC/AML Credentials.Opening Credit Markets (Lending Protocol): A Native Lending Protocol is under development to facilitate compliant on-chain credit markets, with the XRPL V3.0.0 amendment slated for release later this year.
With these key amendments going live, XRPL is primed for explosive growth driven by strategic partnerships and organic institutional inflows.
5.2.3 Real-World Utility
If RWA and DeFi are domains for 'Operating' and 'Managing' assets on-chain, the final puzzle piece is bridging this massive capital with existing financial networks.
The recently announced collaboration with Mastercard, WebBank (U.S. regulated bank), and Gemini goes beyond a simple 'Retail Card Launch'. Ripple and RLUSD are targeting a fundamentally different dimension. The core of this partnership lies not in the consumer-facing payment interface, but in the innovation of the settlement structure operating in the backend.
Convergence of Regulation and Tech: This marks the first instance where "A regulated U.S. Bank (WebBank), utilizing global payment rails (Mastercard), settles transactions on a public blockchain (XRPL) using a regulated stablecoin (RLUSD)."Capturing Institutional Flows: This transcends retail payments. Ripple aims to replace the Backend of the financial infrastructure—where trillions of dollars in institutional capital flow—with XRPL and RLUSD.
In essence, armed with 'Institutionalized Trust', RLUSD is paving the way to replace the legacy financial network’s complex and slow settlement processes with blockchain technology. This completes the circular structure of the XRP DAT model: from Custody to Investment, Finance, and finally, Settlement.

6. Beyond Price: Toward Economic Integration
While the ETF approval was a catalyst for 'Price Appreciation' to the market, network data has starkly exposed the limitations of 'Caged Adoption', where assets remain locked in custodial vaults.
Whereas the BTC-based DAT model was confined to a passive 'Buy-and-Hold' Bitcoin as a store of value, the XRP DAT model charts a radically different trajectory. XRP, combined with Ripple’s infrastructure (Prime, Custody, Payments), becomes 'Active Capital' utilized for actual payments, collateralization, and liquidity provision. This transcends mere price appreciation; it is materializing 'Pre-emptive Institutional Preparation via Corporate DAT', 'DeFi Visions linked with RWA Metrics', and 'Real-World Utility connected to Institutions'.
Above all, XRP DAT adoption, grounded in accounting clarity, offers the 'Most Realistic Solution' for corporations to incorporate assets onto their balance sheets without regulatory risk. This is not merely a forecast; it is being proven by actual global 'Capital Migration'.
United States: Led by Trident Digital Tech ($500M), a wave of specific acquisition plans has been announced by Webus International ($300M), Wellgistics ($50M), Nature's Miracle ($20M), Reliance Group Global ($17M), and Hyperscale Data Inc. ($10M). Notably, Vivopower demonstrated aggressive commitment by purchasing private Ripple equity and raising $19M specifically for XRP acquisition.Japan & Global: Japanese financial giant SBI Holdings is estimated to hold over $100 M in XRP as of the end of Q3. This is a definitive case showing institutions recognize XRP not as a 'token', but as 'Long-term Capital'. Furthermore, Japanese gaming company Gumi also announced a $17.5 million purchase plan, accelerating XRP adoption.
Ultimately, the true 'Real Case' for the DAT model will be realized by Ripple. Beyond the simple effect of supply contraction, a powerful 'Economic Flywheel' has begun to turn: Corporate utilization drives network transactions, which in turn accelerates fee burning (Structural Deflation).
XRP no longer remains a mere store of value. It is establishing itself firmly as 'Active Capital' that creates value by being 'Used' rather than 'Held', and as the Backend of Financial Infrastructure supporting the real economy.

Key Sources
Cointelegraph - XRP gets legal recognition as property in India
Messari - State of XRP Ledger Q3 2025
Github - XLS: Confidential Multi-Purpose Token
Glassnode Studio - Onchain Market Intelligence

Disclaimer
The contents of this report are for informational purposes only and do not constitute a recommendation or basis for legal, business, investment, or tax advice under any circumstances. References to specific assets or securities are for informational purposes only and do not represent an offer, solicitation, or recommendation to invest. The final responsibility for any investment decisions lies solely with the investor, and this report should not be used as a guideline for accounting or legal judgment.
As a matter of principle, the author does not trade related assets using material non-public information obtained during the research or drafting process. The author and Catalyze may have financial interests in the assets or tokens discussed herein and may serve as a strategic partner to certain networks.
The opinions and analyses expressed in this report reflect the author's personal views and do not necessarily represent the official position of Catalyze or its affiliates. All information is current as of the date of publication and is subject to change without prior notice.

Midnight resolves the Privacy Trilemma by seamlessly integrating data sovereignty with institutional-grade privacy. This research analyzes a technical architecture that achieves both rational privacy and regulatory compliance, illuminating how privacy infrastructure functions as a core operating system for institutional business.

1. From Anonymity to Rational Privacy
1.1 Resolving the Privacy Trilemma: The Coexistence of Regulation and Confidentiality
Blockchain technology has advanced exponentially, starting with Bitcoin’s value transfer, evolving through Ethereum’s smart contracts, and reaching the scalability and governance models championed by Cardano. However, the complete transparency inherent in public blockchains has ironically become a barrier to entry for institutional businesses.
Financial transaction records, medical histories, and corporate supply chain data require strict confidentiality while simultaneously necessitating compliance with rigorous legal regulations. In a legacy environment where all data is permanently public, enterprises have faced a "Privacy Trilemma"—a forced choice between privacy, programmability, and regulatory compliance. Midnight is strategically positioned as a fourth-generation blockchain designed to solve this trilemma through technical integration.
1.2 The Vision of 4th Generation Blockchains: Data Sovereignty and Programmability
Past privacy-focused projects prioritized absolute anonymity as their primary technical goal. Early privacy coins like Monero and Zcash focused on concealing all information, which inadvertently made them incompatible with institutional financial systems due to the impossibility of regulatory tracking.
The "Rational Privacy" proposed by Midnight is not merely about hiding information. It empowers users with complete Data Sovereignty, granting them the authority to selectively disclose information according to specific business rules. As a fourth-generation blockchain, Midnight aims to provide a programmable balance between the privacy that must be protected and the trust that must be proven.
1.3 The Need for Privacy Infrastructure for Institutional Business
For traditional finance (TradFi) and enterprise-grade applications to fully onboard into the Web3 ecosystem, they require infrastructure that goes beyond simple encryption. They must be able to enjoy the security and efficiency of public blockchains while complying with global data guidelines, such as Europe’s GDPR or the U.S. HIPAA.
For institutional investors and corporations, privacy is a matter of survival, not just a preference. The moment contract terms or salary data—which must not be exposed to competitors—are recorded on-chain, that business loses its competitive edge. Midnight establishes a new standard as a regulatory-compliant privacy infrastructure, providing the technical foundation for Web3 to function as a practical business operating system.

2. Strategic Realignment of the Privacy Sector: Competitive Advantage Analysis
Midnight is structurally addressing the issues of fragmented security and cost instability that previous privacy projects failed to resolve. Moving beyond the stage of simply showcasing technical prowess, Midnight aims for a sustainable privacy infrastructure that enterprises can practically adopt.
2.1 Midnight vs. Aleo: The Security Cold Start and Initial Liquidity Gap
Independent Layer 1 projects like Aleo face a "Cold Start" problem, where they must build their own security models and liquidity from the ground up. The process of recruiting a new validator network and attracting new assets creates security uncertainties, which act as a decisive barrier to entry for institutions managing large-scale funds.
In contrast, through its Cardano Partner Chain strategy, Midnight immediately inherits the robust Proof-of-Stake (PoS) security framework of Cardano—which has maintained 100% uptime for over five years—and accesses billions of dollars in existing liquidity. Midnight’s approach of leveraging a mature ecosystem’s security infrastructure rather than relying on an unverified nascent network serves as a powerful incentive for institutions to trust and onboard onto the network.
2.2 Midnight vs. Aztec: Cost Predictability and the Stability of the DUST Model
Aztec, an Ethereum Layer 2 solution, provides strong anonymity but remains tethered to the volatility of Ethereum mainnet gas fees. For enterprise-grade services, cost predictability is a core element that determines business continuity. However, establishing a fixed operating budget is nearly impossible in market conditions where gas fees can spike unpredictably.
Midnight solves this by introducing a dual-token model consisting of NIGHT and DUST. DUST, which functions as gas, is automatically generated based on the amount of NIGHT held and follows a renewable resource structure that decays once consumed. This allows corporations to establish fixed operating budgets without volatility risks and ensures a gasless user experience (UX) for end-users, facilitating the mass adoption of services.
2.3 Strategic Analysis: The Landscape of Privacy Blockchains
The following table summarizes the key differentiators between Midnight and its primary competitors in the privacy sector:

3. Technology of Data Sovereignty: The Kachina Protocol
Midnight’s architecture features a hybrid structure designed to achieve both development efficiency and data sovereignty. It is characterized by combining the security of a public ledger with the confidentiality of a private execution environment. By redesigning the environment in which data is created and consumed, Midnight realizes true data sovereignty beyond simple encryption.
3.1 Hybrid Dual-State: Merging Public Ledgers with Private Execution
Midnight operates a "Combined Model" that integrates a UTXO-based public ledger with an account-based private execution environment. This strategy secures both the parallel processing scalability of blockchain and the complex programmability of smart contracts.

This dual structure enables an efficient workflow where sensitive business logic is processed strictly off-chain, while only the integrity of the results is finalized on-chain.
3.2 Local-First Execution: Ensuring Confidentiality and Resolving Concurrency
The Kachina Protocol materializes data sovereignty through Local-First Execution. Users process private data on their local proof servers and submit only a compressed Zero-Knowledge Proof—approximately 128 bytes—to the chain. Since the original data is never exposed to the network, this serves as a technical foundation for inherently complying with global data protection regulations like GDPR or HIPAA.
Furthermore, Midnight introduces a "Transcript Mechanism" to resolve the concurrency bottlenecks common in ZK-based chains. By allowing multiple users to interact without waiting in a queue for state updates, Midnight ensures the high throughput required for enterprise-grade services.
3.3 Synergies with AI Agents: A Trusted Infrastructure for Private Collaboration
Midnight’s technical structure plays a critical role in AI environments where corporate secrets must be protected while output values must be verified. Through State Oracle Transcripts, the system precisely connects public and private states, allowing AI agents to perform trust-based collaboration without exposing sensitive data.
This provides an optimized environment for infrastructure-level AI businesses that need to keep model logic or training data confidential while proving that the results adhere to predefined rules. Ultimately, Midnight is positioning itself as the layer that satisfies both data security and verifiability as AI and Web3 converge.

4. Hardware Acceleration and Next-Generation Security
While Zero-Knowledge Proofs (ZKP) provide robust privacy, the massive computational load required for proof generation has been a significant hurdle for mainstream adoption. Midnight addresses this by moving beyond software-level fixes and integrating hardware acceleration technologies directly into its architectural level.
4.1 Tensor Codes: Proof Acceleration via NVIDIA Tensor Core Optimization
To drastically reduce the cost of ZK computations, Midnight introduced "Tensor Codes," a technology optimized for NVIDIA Tensor Core hardware—which is already widely deployed for AI training. This approach mathematically aligns the complex cryptographic operations required for ZK proofs with AI computing units to maximize processing speed.
Through this hardware-friendly design, Midnight has improved proof generation speeds by 2x to 5.7x compared to traditional methods. This is more than just a performance boost; it establishes an economic symbiosis between Midnight’s privacy infrastructure and the world's rapidly expanding GPU resources. As hardware efficiency improves with the growth of the AI industry, Midnight’s computational costs will continue to decline, creating a long-term asymmetric advantage and a formidable Economic Moat that other networks will find difficult to replicate.
4.2 Post-Quantum Security: Permanent Data Protection via Lattice-Based Cryptography
Data handled by institutional financial entities and large corporations must remain secure not just for a few years, but for decades. To counter future threats from quantum computing, Midnight has preemptively established next-generation security standards by adopting Lattice-based cryptography.
Lattice-based cryptography is based on mathematical problems that are notoriously difficult to solve even with the overwhelming processing power of quantum computers, providing what is known as Post-Quantum Security. This ensures that sensitive institutional data can be preserved on on-chain infrastructure for decades without the risk of future decryption or leakage. Through this forward-looking investment in security, Midnight is building the most resilient foundation to permanently safeguard data sovereignty in the future digital economy.

5. Synergy of Regulatory Compliance and Operational Efficiency: ZK-Compliance
Midnight is proving that regulatory compliance can be a core competitive advantage rather than a business hurdle. Its architecture is specifically optimized to drastically lower the legal risks and operational costs faced by Virtual Asset Service Providers (VASPs).
5.1 Selective Disclosure: A Validation Mechanism Without Data Leakage
Traditional authentication methods suffer from "data over-exposure," where a user must hand over all personal information to a verifying authority. Midnight’s ZK-KYC technically implements the principle of Data Minimization, allowing users to prove they meet specific eligibility requirements without exposing concrete Personally Identifiable Information (PII).
For example, when proving adult status, a user can submit a Zero-Knowledge Proof showing their wallet holds a valid adult certification without revealing their actual date of birth or address. This enables validity verification without storing PII on-chain, providing a technical solution that inherently satisfies strict regulations such as Europe’s GDPR or the U.S. HIPAA.
5.2 Real-time Travel Rule Compliance: 96% Reduction in Operational Costs
For financial institutions, the cost of compliance is a major variable determining profitability. Midnight’s ZK-based automated compliance system is estimated to lead to an unprecedented 96% reduction in operational costs compared to traditional manual audit processes used in the financial sector.

By streamlining complex transaction verification through real-time ZKPs, enterprises can resolve the bottlenecks of regulatory compliance and maximize business profit margins.
5.3 Practical Use Case: The Standard for Institutional Privacy Stablecoins
The representative case of Midnight’s compliance capability is ShieldUSD. Jointly issued by Moneta Digital and NBX and developed by W3i Software, this asset is designed to allow institutional investors and corporations to protect the confidentiality of payment details while fully complying with Anti-Money Laundering (AML) regulations.
Through ShieldUSD, corporations can safeguard sensitive B2B payment data or employee payroll details that must not be exposed externally. Simultaneously, they can provide transparent disclosure and audits through the Selective Disclosure feature upon request from regulatory authorities. This establishes a new standard for institutional digital finance by merging the two difficult-to-reconcile values: confidentiality and AML compliance.

6. Separation of Capital and Resources: NIGHT and DUST
Midnight maximizes network sustainability and cost predictability by strictly separating NIGHT, the capital asset, from DUST, the operational resource. This unique economic model addresses the chronic issue of gas fee volatility in existing blockchains, providing a stable environment for enterprises to manage on-chain resources.
6.1 Asset Layer (NIGHT): Network Security and Store of Value
NIGHT is the governance and staking asset responsible for the security of the Midnight network. Its total supply is capped at 24 billion, ensuring scarcity as a long-term store of value. Notably, NIGHT is designed as an Unshielded (non-anonymous) token. This strategic choice minimizes friction with regulatory authorities and satisfies the asset-holding requirements of institutions and major centralized exchanges (CEX).
NIGHT holders not only receive rewards for contributing to network security but also gain the right to produce DUST, the underlying resource. This elevates NIGHT from a mere investment vehicle to a core infrastructure asset essential for business operations.
6.2 Fuel Layer (DUST): Gasless UX and Self-funded DApps
DUST is the actual operational resource required to power the Midnight network. While it performs a role similar to gas fees in traditional blockchains, the key difference is that DUST is a protected resource—it is not traded on the open market but is automatically generated in proportion to the amount of NIGHT held.
This structure brings two major innovations to business operations:
Cost Predictability: By holding a certain amount of NIGHT, an enterprise can secure a fixed transaction processing capacity regardless of gas fee fluctuations in the market.Gasless User Experience (UX): DApp operators can supply DUST via their own NIGHT holdings, allowing end-users to utilize services without the hassle of paying gas fees. This serves as a powerful tool for implementing Web2-level convenience in a Web3 environment.
6.3 Optimizing Network Availability through Resource Lifecycle Management
DUST follows a four-stage lifecycle: Generation, Maximum Saturation, Gradual Decay, and Final Expiration. When NIGHT is held, DUST begins to generate, reaching Peak Capacity in approximately one week. If the associated NIGHT is moved or consumed, the linked DUST gradually decays and eventually expires.
This mechanism prevents the hoarding of network resources and ensures that network capacity is organically adjusted according to the amount of active staking. Consequently, Midnight optimizes overall network availability, guaranteeing stable performance even when multiple enterprises process large-scale transactions simultaneously.

7. Ecosystem Expansion and Step-by-Step Roadmap
Midnight is successfully overcoming the common hurdles faced by nascent Layer 1 blockchains, such as insufficient security and the difficulty of acquiring initial users. By building upon Cardano’s robust infrastructure, Midnight is executing a multi-stage expansion strategy that gradually absorbs security assets and user bases from other ecosystems.
7.1 The Minotaur Consensus Algorithm: Integrated Multi-Asset Security and Re-staking
The core of Midnight’s security lies in Minotaur, a hybrid consensus algorithm that combines Proof-of-Stake (PoS) and Proof-of-Work (PoW) resources. Beyond a simple hybrid structure, it aims to realize Re-staking by integrating various external assets into its security model.
By allowing not only Cardano’s ADA but also security assets from Bitcoin (BTC) or Ethereum (ETH) to participate in the consensus process, Midnight can secure industry-leading protection from its inception. This multi-asset security integration serves to consolidate fragmented liquidity and security energy from across the industry into a single, unified privacy layer.
7.2 Global Partnerships: Real-World Adoption with Google Cloud and Financial Institutions
Midnight is proving its institutional readiness through tangible partnerships with Tier-1 global partners. The node operation alliance announced ahead of the mainnet launch in March 2026 symbolizes the practical value of the "Rational Privacy" that Midnight champions.
Google Cloud & Mandiant: Google Cloud participates as a federated node operator, ensuring infrastructure stability. Specifically, the integration of threat monitoring and confidential computing technologies from Mandiant (Google's cybersecurity arm) completes an institutional-grade security environment.MoneyGram & eToro: Leaders in global remittance and fintech, MoneyGram and eToro are exploring next-generation payment solutions that utilize Midnight’s Selective Disclosure feature to protect user privacy while complying with regulations.Vodafone (Pairpoint): Vodafone’s Economy of Things (EoT) platform, Pairpoint, has adopted Midnight’s ZK architecture to implement trusted identity authentication while maintaining confidentiality across transactions between hundreds of millions of devices.
7.3 Roadmap Outlook: Toward a Universal Privacy Layer
Midnight’s roadmap signals an evolution from a Cardano sidechain to a Universal Privacy Layer for the entire Web3 ecosystem.
Hilo (December 2025): This stage focused on establishing initial liquidity and a community foundation alongside the NIGHT token launch.Kūkolu (March 2026): The current Mainnet Genesis phase. Production-ready DApps are officially going live on a federated network operated by trusted partners like Google Cloud.Mōhalu: Decentralization will accelerate as Stake Pool Operators (SPOs) join the network, and the tokenomics will enter full gear through the DUST Capacity Exchange.Hua: The final stage of evolution, where a hybrid ecosystem is completed. DApps on other major chains (e.g., Ethereum, Solana) will be able to invoke Midnight’s ZK infrastructure via API to implement instant privacy features.

8. Conclusion: Evolution into a Universal Privacy Layer
Midnight is establishing itself as more than just a privacy-focused chain; it is a specialized layer for the secure and confidential execution of user intent. While legacy blockchains have been procedure-centric environments—requiring users to explicitly define every execution path for a transaction—Midnight shifts toward an intent-centric architecture. In this model, users simply declare the desired outcome, and the network autonomously determines the optimal path while maintaining strict confidentiality.
8.1 Purpose-Driven Design and UX Innovation
The universal privacy layer envisioned by Midnight fundamentally redefines the Web3 user experience. Without worrying about complex smart contract calls or data exposure, users simply convey their intended results to the network. Under the hood, Midnight’s Zero-Knowledge (ZK) infrastructure and the Kachina Protocol simultaneously handle regulatory compliance and data confidentiality.
This paradigm shift enables the abstraction of business logic. Developers can focus on the core essence of their business rather than getting bogged down in complex cryptographic implementations. Meanwhile, enterprises can perform necessary real-time verifications without the burden of directly owning sensitive customer data. This signifies an advanced form of infrastructure where technology does not force a choice between regulation and privacy but systematically guarantees both.
8.2 A New Standard for Safeguarding Data Sovereignty in the Digital Economy
Midnight’s market competitiveness is anchored by three strategic pillars:
Selective Disclosure: By removing the legal uncertainties of traditional privacy technologies, Midnight has revolutionized regulatory compliance, reducing operational costs by over 96%.Hardware Optimization: Through Tensor Codes, Midnight has established a sustainable security model that lives in symbiosis with the computational resources of the AI era.Accessibility: With the TypeScript-based Compact language, Midnight provides an environment where tens of millions of developers worldwide can immediately begin building privacy-first applications.
In conclusion, Midnight is poised to lead an era of autonomous economic agents, where corporations and individuals can exercise full data sovereignty while actively participating in global economic networks. The philosophy that privacy is not merely the act of concealing information, but the right to decide the scope of its disclosure, is being transformed into tangible business value through Midnight’s technology. Midnight will secure its position as the most robust standard infrastructure, safeguarding both the asset value of data and individual rights in the future digital economy.

Key Source
MEXC Blog (2025) - Midnight Network: The Architecture Of Rational Privacy
Carthagex Labs (2025) - Midnight Network Architecture: The Fourth Generation of Blockchain ...
NBX (2025) - What is Midnight (NIGHT)? Buy NIGHT Token on NBX
BlockEden.xyz (2025) - Midnight as Cardano's Multi-Chain Pivot: Partner Chains, LayerZero, and What This Means for the Ecosystem
CoinGecko (2025) - Midnight Network: A Guide to Programmable Privacy
MEXC Exchange (2025) - What is Cardano Midnight? The Privacy Sidechain & Airdrop Explained
CoinMarketCap (2026) - Latest Midnight News - (NIGHT) Future Outlook, Trends & Market Insights
Asic Marketplace (2026) - Best Aleo Miners of 2026
DSpace @HANSUNG (2024) - TensorCrypto: High Throughput Acceleration of Lattice-Based Cryptography Using Tensor Core on GPU
Zipmex (2026) - Best Privacy Crypto Projects and Airdrops 2026 | Complete Guide
Midnight Network (2025) - Midnight | NIGHT token
CoinMarketCap (2026) - What Is Midnight (NIGHT) And How Does It Work?
BingX (2025) - What Is Midnight (NIGHT) Privacy-First Sidechain and How to Buy It?
Midnight Docs (2025) - Architecture Overview DUST and Network Usage
Midnight Docs (2025) - Kachina
Input | Output (2025) - Kachina: privacy-preserving smart contracts
Midnight Docs (2025) - Midnight's proving system switched from Pluto Eris ...
Rare Evo (2025) - Midnight Sets December 8, 2025 Launch for NIGHT Token and Privacy Network
Reddit (2026) - Midnight (Cardano partner chain) proposes “confidential by default” TXs with selective ZK disclosure
Estarmureithi (2026) - Zero-Knowledge Proofs and Travel Rule: Examining the Technical Regulatory Gap
Hacken.io (2025) - Crypto Travel Rule: Global VASP Requirements in 2025
AMLBot Blog (2025) - Crypto Travel Rule Implementation: Key Challenges for Crypto Businesses
SSRN (2025) - Reducing AML Compliance Costs in Blockchain Finance
iComply (2025) - Travel Rule Compliance for EU VASPs: KYT and Edge-Based KYC in 2025
Shinkai Blog (2024) - Midnight Summit 2024: Privacy, Zero-Knowledge, and the Future of ...
IronCore Labs (2026) - AI Coding Agents: Our Privacy Line in the Sand
GitHub (2026) - UvRoxx/midnight-agent-skills
DEV Community (2026) - Building midnight-agent-skills: AI-Powered Development for Privacy-First Blockchain Made Easy
Medium (Wisdom Oguzie) (2025) - The DePIN Privacy Layer: Building Trustworthy Physical Infrastructure Networks
OneKey (2025) - DePIN Track Explained: What Are Decentralized Physical Infrastructure Networks and Why Do They Matter?
Medium (Lithium Digital) (2025) - Namada: The Future of Cross-Chain Privacy and Asset Protection
OneKey (2025) - Zcash vs. Monero: A Comparative Analysis of Two Privacy Titans in 2025
StakeCito (2025) - Namada: Addressing Privacy Fragmentation in Blockchain Technology
Figment (2025) - Namada First Look: Redefining Privacy Standards
Midnight Network (2025) - Guide to the NIGHT token launch and Redemption

Disclaimer
The contents of this report are for informational purposes only and do not constitute a recommendation or basis for legal, business, investment, or tax advice under any circumstances. References to specific assets or securities are for informational purposes only and do not represent an offer, solicitation, or recommendation to invest. The final responsibility for any investment decisions lies solely with the investor, and this report should not be used as a guideline for accounting or legal judgment.
As a matter of principle, the author does not trade related assets using material non-public information obtained during the research or drafting process. The author and Catalyze may have financial interests in the assets or tokens discussed herein and may serve as a strategic partner to certain networks.
The opinions and analyses expressed in this report reflect the author's personal views and do not necessarily represent the official position of Catalyze or its affiliates. All information is current as of the date of publication and is subject to change without prior notice.

The strategic integration of Ripple Prime and Hyperliquid presents a new financial standard connecting TradFi and DeFi. This research analyzes the technical and strategic implications of this collaboration and identifies future business opportunities for the XRPL based on these insights.
1. Introduction
1.1 The Convergence of TradFi and DeFi: The Integration of Ripple Prime and Hyperliquid
The boundaries between Traditional Finance (TradFi) and Decentralized Finance (DeFi) are dissolving faster than ever before. The strategic integration of Ripple Prime and Hyperliquid, announced in February 2026, serves as a pivotal milestone accelerating this trend. By extending its institutional-grade prime brokerage infrastructure—acquired through large-scale M&A—into the DeFi space, Ripple has established a practical gateway for institutional capital to enter the on-chain ecosystem.
1.2 Innovation in Institutional-grade Risk Management and Capital Efficiency
Despite the high profitability of DeFi, institutional investors have historically been hesitant to participate due to regulatory uncertainty and the complexities of risk management. Ripple Prime addresses these concerns by combining the deep liquidity of Hyperliquid, a high-performance decentralized exchange, within a framework familiar to institutional clients. This structural innovation enables cross-margining across all asset classes, effectively achieving both robust security and maximized capital efficiency.
1.3 Redefining XRPL’s Identity: The Enterprise Financial Infrastructure Layer
This collaboration signals a significant turning point for the XRP Ledger (XRPL) ecosystem. While XRPL’s current Total Value Locked (TVL) remains modest compared to other major chains, this disparity highlights the immense growth potential for on-chain financial activity relative to its substantial market capitalization. This research analyzes how XRPL is evolving into an enterprise financial infrastructure that bridges TradFi and DeFi. Specifically, we will provide an in-depth exploration of the XRP Liquid Staking Token (LST) infrastructure—which remains independent of specific protocols—and the new business opportunities it creates.
2. Ripple Prime: Expanding Institutional Prime Brokerage into DeFi
2.1 The Acquisition of Hidden Road and the Birth of Ripple Prime
In April 2025, Ripple made a decisive move to dominate the institutional financial market by acquiring Hidden Road for $1.25 billion ($1.25B), the largest M&A in the cryptocurrency industry. Hidden Road was a premier multi-asset prime broker providing clearing, prime brokerage, and financing services to over 300 institutional clients, processing more than $3 trillion ($3T) in annual volume across FX and digital asset markets. Following the acquisition and rebranding to Ripple Prime, the platform saw a threefold increase in trading volume. It is now accelerating its organic integration with the Ripple ecosystem by utilizing the RLUSD stablecoin as collateral and executing plans to migrate post-trade activities to the XRP Ledger (XRPL).
Prime Brokerage: Ripple Prime - Source: Ripple
2.2 The First Step in DeFi Expansion: Hyperliquid Integration
Against this strategic backdrop, the integration of Hyperliquid represents the first practical execution of Ripple Prime’s vision in the DeFi space. The core of this integration lies in providing institutional clients with direct access to Hyperliquid’s decentralized perpetual futures market while maintaining the same level of stability found in traditional prime brokerages.
The key features of the integration mechanism are as follows:
Single Counterparty Model: Even when trading on DeFi protocols, Ripple Prime remains the sole counterparty for institutional clients, centralizing and streamlining risk management while preventing the dispersion of counterparty risk.Unified and Cross-margining: DeFi positions can be cross-margined alongside all other asset classes, including FX, fixed income, OTC swaps, and cleared derivatives.Maximization of Capital Efficiency: By utilizing the entire portfolio as a single pool of collateral, the platform optimizes collateral efficiency and capital deployment.
2.3 Value and Vision as Institutional-grade Infrastructure
Regarding this collaboration, Michael Higgins, CEO of Ripple Prime International, stated, “We are leading the way in combining decentralized finance with traditional prime brokerage services, providing direct trading support, yield generation, and broad access to digital assets”. This represents a structural innovation that moves beyond simple functional linkage to seamlessly integrate DeFi liquidity into TradFi workflows within an institutional-grade risk management framework. Consequently, Ripple Prime has positioned itself as a unique gateway, allowing institutional investors to leverage Hyperliquid’s deep liquidity—reaching $32 billion in daily volume—while maintaining the interfaces and regulatory compliance environments they are accustomed to.
3. Current TVL Status of XRPL and Opportunities for Institutional DeFi
3.1 The Current State and Limitations of XRPL DeFi in Numbers
From a purely numerical perspective, the XRP Ledger (XRPL) decentralized finance (DeFi) ecosystem is currently in its nascent stages compared to other Layer 1 blockchains. As of February 2026, the Total Value Locked (TVL) on XRPL stands at approximately $50.0 million. This figure is significantly lower when compared to Ethereum (ETH), which boasts over $50 billion in TVL, or Solana (SOL), which exceeds $10 billion. Furthermore, the fragmented TVL structure across roughly 19 protocols and low activity on native DEXs suggest that competing in the retail-centric DeFi space remains a challenge for XRPL to address in the future.
3.2 The TVL Paradox: Analyzing Potential Relative to Market Capitalization
However, these metrics contain a "TVL Paradox" that fails to fully reflect XRPL’s intrinsic market value. While the liquidity potential of XRP—a major asset by market capitalization—is massive, the currently low TVL indicates that this liquidity has not yet been sufficiently converted into on-chain financial activities. If XRPL were to achieve a TVL-to-Market Cap ratio similar to those of major chains like Ethereum or Solana, it would lead to the formation of an explosive institutional DeFi market that is dozens of times larger than current figures. In essence, XRPL has the potential to bypass retail-oriented TVL competition and directly link its vast market cap-based liquidity to institutional-grade financial services.
3.3 Strategic Positioning as an Enterprise Financial Infrastructure Layer
Ultimately, XRPL’s strategic focus is on strengthening its identity as an enterprise financial layer trusted by traditional financial institutions, rather than competing for high Annual Percentage Yields (APY) among general users. Its technical capabilities—including a processing capacity of over 1,500 transactions per second, 3-5 second settlement finality, and a proven track record of over 10 years of stable operation—provide an optimal environment for institutional investors to migrate trillions of dollars in capital on-chain. Ripple Prime’s plan to naturally guide its 300+ institutional clients and $3 trillion in annual transaction volume into the XRPL ecosystem is rooted in these infrastructural strengths. Consequently, XRPL is poised to secure a unique position as a powerful pipeline for institutional capital and a global financial infrastructure, transcending simple numerical competition.
4. XRP LST Infrastructure: A Multi-layered Yield Layer Beyond Staking
4.1 Opportunities in the XRP Staking Market and the Introduction of LST Infrastructure
XRP currently misses out on the opportunities presented by the global staking market, which is valued at approximately $116 billion, due to the absence of a native staking mechanism. However, once Liquid Staking Token (LST) infrastructure is fully introduced to the XRP Ledger (XRPL), it is expected to serve as a core financial foundation that maximizes the capital efficiency of institutional funds, rather than being just a simple yield product. The core value of XRP LST infrastructure lies in its potential as an independent yield generation layer that is not subordinate to the success or failure of any specific protocol.
4.2 Combining LST with High-Speed Trading Layers: Realizing Multi-layered Yield Models
The synergy generated when this LST infrastructure is combined with high-speed trading layers like Hyperliquid provides a highly attractive scenario for institutional investors. Institutions can maintain the base yield generated by staking XRP while simultaneously seeking additional alpha by utilizing those LSTs as collateral for Hyperliquid derivative trades. This enables a multi-layered yield structure—extending from staking rewards to collateral utilization and leveraged trading—without selling the underlying assets, effectively and drastically lowering the opportunity cost of capital.
4.3 Completion of the Multi-layer Ecosystem: Synergy of Payment, Yield, and Trading
The XRP ecosystem is completing a multi-layer structure where roles are separated yet complementarily connected: XRPL as the payment and settlement layer, LST infrastructure as the yield generation layer, and Hyperliquid as the high-speed trading and derivatives layer. In particular, if Ripple Prime accepts XRP LSTs as official collateral, institutions will be able to perform cross-margin trading within the same collateral pool, moving between traditional assets like FX or bonds and digital asset derivatives.
4.4 Evolution into a Core Asset for Institutional Finance
This infrastructure-centric approach will act as a decisive catalyst, evolving XRP from a mere remittance tool into a core liquidity and yield asset for global institutional finance. This presents a strategic direction that maximizes the competitiveness of the entire ecosystem by establishing best-in-class infrastructure at each layer, relieving XRPL of the burden of attempting to provide every function within a single chain.
5. Five Key Business Opportunities and Future Value of the XRPL Ecosystem
The combination of Ripple Prime and Hyperliquid opens a new business horizon for the entire XRPL ecosystem that extends far beyond simple technical linkage. By moving away from retail-centric DeFi competition and positioning as an institutional-grade financial infrastructure, the following five key business opportunities emerge.
5-1. On-chain Clearinghouse & Real-time Settlement Infrastructure
Ripple Prime’s plan to migrate post-trade activities to the XRPL is a powerful solution to the chronic inefficiencies in institutional finance. By establishing an on-chain clearinghouse that processes the clearing and settlement of multi-asset trades atomically on the XRPL, the traditional T+2 settlement system can be shortened to T+0 or real-time settlement.
This dramatically enhances capital efficiency in the global securities lending market, valued at approximately $1.2 trillion.It also provides opportunities to minimize operational risks through automated margin calls and liquidation systems based on smart contracts.
5-2. Cross-chain Bridge Hub & Liquidity Aggregator
Through deep integration with protocols like Axelar and LayerZero, XRPL can serve as a hub that consolidates liquidity across different blockchains.
It is possible to build a liquidity aggregator business that connects major chains such as Hyperliquid (L1), Ethereum, and Solana to the XRPL hub, managing them through a single interface.With approximately 45% of Fortune 500 companies exploring multi-chain strategies, Ripple Prime’s institutional-grade bridge services—which comply with KYC/AML—are well-positioned to secure a competitive edge in a cross-chain market expected to reach $911 million by 2032.
5-3. RLUSD-based RWA (Real World Asset) Tokenization & Collateralized Lending Market
The RWA market is growing rapidly, reaching $24 billion in 2025, with institutional participation accelerating. XRPL can provide a platform for the on-chain clearing and settlement of tokenized assets such as real estate, bonds, and equities.
Utilizing RLUSD as the standard settlement rail allows for services like providing loans against tokenized Treasury bills—similar to BlackRock’s BUIDL fund.Multi-chain portfolio margin services, managing RWA assets scattered across Ethereum and Solana within a single collateral pool, provide a foundation to compete with traditional banking infrastructures like Goldman Sachs’ GS DAP or JPMorgan’s Onyx.
5-4. Institutional (Permissioned) DeFi & ZKP Privacy
To address the regulated DeFi market where over $100 billion in institutional capital moves, XRPL can establish whitelist-based, institutional-only liquidity pools.
Leveraging planned 2026 upgrades for DeFi lending and Zero-Knowledge Proof (ZKP) interoperability, XRPL can ensure transaction confidentiality—a prerequisite for institutional clients—while maintaining transparent on-chain management.This offers a risk management environment distinct from general retail DeFi, providing a unique path for Ripple Prime’s 300+ institutional clients to safely enjoy DeFi yields.
5-5. AI Agent-based Smart Liquidity Routing Optimization
AI agent technology, a core DeFi trend for 2026, can be introduced to optimize trade execution.
'Multi-chain Smart Routing,' where AI searches and executes at the optimal price across scattered liquidity pools like Hyperliquid, Uniswap, XRPL DEX, and CEXs, minimizes slippage for institutional clients.Through proactive collateral adjustment functions based on dynamic risk analysis and market volatility predictions, XRPL can evolve beyond a simple transfer network into a sophisticated intelligent financial execution layer.
6. The Future of XRPL: Advancing Towards Global Financial Infrastructure
6-1. A Milestone for a New Leap: Ripple Prime x Hyperliquid
The collaboration between Ripple Prime and Hyperliquid transcends a simple partnership between two platforms; it clearly defines the next-generation direction for Ripple and the XRP Ledger (XRPL) ecosystem. This represents a strategic choice to bypass the retail-centric Total Value Locked (TVL) competition that has consumed other Layer 1 (L1) chains and instead secure a unique identity as an institutional-grade financial infrastructure layer. This integration is significant because it establishes a practical pathway to naturally guide Ripple Prime’s 300+ institutional clients and their massive $3 trillion ($3T) annual transaction volume into the XRPL ecosystem.
6-2. Vision for a Multi-layered Financial Hub
Ultimately, the future vision of XRPL lies not in a closed structure that attempts to complete all functions within a single chain, but in a ‘Multi-layered Financial Hub’ where infrastructures providing best-in-class performance at each layer are organically connected. Specifically, this is a structure where the XRPL Mainnet (handling payment and settlement), the LST (Liquid Staking Token) infrastructure (maximizing capital efficiency and yield generation), and Hyperliquid (providing high-speed trading and derivatives markets) operate complementarily. This approach is the most realistic and powerful way to overcome the limitations of XRPL’s current low TVL while simultaneously meeting the rigorous risk management and capital efficiency requirements of institutional investors.
6-3. Recommendations for Global Financial Infrastructure
At this turning point where traditional financial institutions are entering the on-chain world in earnest, XRPL must prove its value as an essential infrastructure bridging TradFi and DeFi, moving beyond its role as a simple cryptocurrency transfer network. By strategically realizing the five business opportunities discussed—on-chain clearinghouse, cross-chain hub, RWA prime brokerage, institutional-only DeFi, and AI-based routing—XRPL can establish itself as a core enterprise layer of the global financial system. The process of building and integrating best-in-class infrastructure at each layer will be the key driver in maximizing the competitiveness of the entire XRPL ecosystem and leading true global financial innovation.

Sources and References
Ripple (2026, Feb 04)- Ripple Announces Support for Hyperliquid, Expanding Institutional Access to Onchain Liquidity
Business Wire (2026, February 3) - Ripple Announces Support for Hyperliquid, Expanding Institutional Access
Bloomberg (2025, April 8) - Ripple to Buy Prime-Brokerage Hidden Road for $1.25 Billion
DefiLlama (2026) - XRPL Total Value Locked
Investing.com (2026, February 5) - XRP: ETF Outflows and Liquidations Keep Near-Term Risk Skewed Lower
Chainscore Labs (2025, June 11) - Tokenized Securities Lending: The $1.2T Market Reboot
Intel Market Research (2025, December 23) - Blockchain Bridges / Crosschain Bridges Market Outlook 2026-2032

Disclaimer
The contents of this report are for informational purposes only and do not constitute a recommendation or basis for legal, business, investment, or tax advice under any circumstances. References to specific assets or securities are for informational purposes only and do not represent an offer, solicitation, or recommendation to invest. The final responsibility for any investment decisions lies solely with the investor, and this report should not be used as a guideline for accounting or legal judgment.
As a matter of principle, the author does not trade related assets using material non-public information obtained during the research or drafting process. The author and Catalyze may have financial interests in the assets or tokens discussed herein and may serve as a strategic partner to certain networks.
The opinions and analyses expressed in this report reflect the author's personal views and do not necessarily represent the official position of Catalyze or its affiliates. All information is current as of the date of publication and is subject to change without prior notice.