Introduction
On December 12, 2023, Hex Trust formally introduced wrapped XRP across multiple blockchain ecosystems, including Ethereum, Solana, Optimism, and HyperEVM. This strategic move was underpinned by an initial liquidity injection of $100 million, aimed at positioning wrapped XRP as a viable trading pair for Ripple’s RLUSD stablecoin. This expansion not only enhances the accessibility of XRP across various networks but also complements existing offerings such as Coinbase’s cbXRP on Base and Axelar’s eXRP on the XRPL EVM sidechain.
Overview of Wrapped XRP Launch
Structural Dynamics of Wrapped XRP
Hex Trust has initiated the issuance of wXRP tokens at a 1:1 ratio with native XRP, which is secured in segregated institutional custody. The minting and redemption processes are exclusively available to authorized participants, adhering to stringent KYC (Know Your Customer) and AML (Anti-Money Laundering) protocols. The token operates on LayerZero’s Omnichain Fungible Token (OFT) standard, enabling supply synchronization through message-passing contracts across various chains. Hex Trust’s initial provision of $100 million in Total Value Locked (TVL) establishes a robust foundation for deep order books from inception.
Historically, Wrapped.com has facilitated the trading of Wrapped XRP as an ERC-20 token on Ethereum since December 2021, with Hex Trust serving as its custodian. Similarly, Coinbase’s cbXRP on the Base layer mirrors this structural framework: it is likewise backed 1:1 by XRP held in Coinbase’s custody and redeemable through established operational workflows.
Diverse Ecosystem Integration
The XRPL EVM Sidechain, which has been operational since June 2025, provides an alternative on-ramp for users wishing to interact with wrapped XRP. This mechanism permits users to lock native XRP on the XRP Ledger in exchange for eXRP on the EVM sidechain via Axelar’s bridging technology. The sidechain employs eXRP as its gas token and integrates Axelar’s interoperability layer to connect with over 80 additional chains, thereby facilitating broader participation in multi-chain DeFi applications.
Additionally, Firelight’s stXRP introduces another dimension by allowing users to stake XRP on Flare and receive a liquid staking derivative. This rapid proliferation of wrapped products signifies distinct use cases; however, they collectively replace the native settlement capabilities of the XRPL with intermediary trust frameworks.
Liquidity Implications and Conditional Gains
Market Dynamics of RLUSD and Wrapped XRP
The RLUSD stablecoin has achieved a significant milestone, surpassing $1 billion in circulation within a year of its launch, predominantly on the Ethereum network rather than the XRPL. This development affords XRP a substantial counterpart in terms of liquidity across chains where trading volumes are already prevalent. The $100 million initial TVL injected by Hex Trust facilitates immediate access to deep order books.
The integration of wrapped XRP into Ethereum, Solana, and Base ecosystems positions it within some of the most active trading venues. While native XRPL does have a functioning decentralized exchange (DEX), its liquidity pales in comparison to platforms such as Uniswap, Curve, or Raydium. A wrapped token deployed on these platforms can leverage superior execution capabilities, tighter spreads, and integration into lending and yield protocols that are not available on XRPL.
The XRPL EVM sidechain coupled with Axelar’s bridge constructs a direct conduit from XRPL into multi-chain DeFi networks. Users can lock their XRP, mint eXRP, and subsequently route it through Axelar to DeFi platforms such as Arbitrum or Polygon where XRP can serve as collateral—an opportunity previously inaccessible via direct XRPL interaction.
However, this liquidity enhancement hinges upon several critical assumptions: that wrappers maintain strict peg integrity; custodians reliably process redemptions; and bridges remain impervious to security breaches. Each assumption introduces additional failure points that were absent from the native XRPL architecture.
Risk Migration Framework
Custodial and Bridge Risks
The transition from native XRP to its wrapped counterparts results in a migration of risk from protocol-level consensus mechanisms to custodial and bridge infrastructures. The foremost concern is custody and issuer risk; each wrapped XRP variant necessitates a custodian responsible for holding the underlying asset. For instance:
- wXRP is backed by Hex Trust
- cbXRP is secured by Coinbase
- eXRP relies on Axelar’s validator network for state management
This additional layer introduces risks associated with centralized entities that promise secure holding and redemption processes for XRP. Any disruption—be it withdrawal halts, insolvency declarations, or cyberattacks—could result in substantial losses for holders of wrapped tokens.
Bridge Vulnerabilities
The second layer encompasses bridge and interoperability risks. Hex Trust’s wXRP utilizes LayerZero’s OFT standard for cross-chain supply management through off-chain message-passing combined with on-chain validation mechanisms. Conversely, Axelar’s eXRP is contingent upon validators effectively relaying state between the XRPL and EVM sidechain environments.
Historical data indicates that bridges represent one of the most targeted elements within decentralized finance exploits. According to Hacken’s 2025 Web3 Security Report, over $1.5 billion out of $3.1 billion stolen from crypto services during the first half of this year were attributable to bridge vulnerabilities—accounting for more than half of all DeFi-related losses.
Redemption Mechanisms and Market Fragmentation
The mechanics surrounding redemption introduce yet another risk dimension. For example, Hex Trust’s wXRP limits minting and redemption capabilities to authorized participants rather than end users. Should these intermediaries experience insolvency or operational disruptions, liquidity providers possessing wXRP would face significant difficulties redeeming their tokens for native XRP.
This situation is compounded by the inherent fragmentation present within the XRP ecosystem: different wrappers—including Wrapped.com’s older ERC-20 wXRP, Hex Trust’s multi-chain wXRP, Coinbase’s cbXRP on Base, and Axelar’s eXRP—each purporting to offer 1:1 backing yet operating under divergent infrastructures. A liquidity crisis or operational interruption affecting one variant could induce arbitrage discrepancies or temporary de-pegging scenarios while generating confusion among users regarding which wrapper retains intrinsic value.
| Risk Type | Description | Manifestation within XRP’s Multi-Chain Configuration |
|---|---|---|
| Custody / Issuer Risk | The requirement for an entity to hold real XRP while guaranteeing 1:1 backing exposes holders to potential under-collateralization or unrecoverable scenarios if custodians fail. | Hex Trust for wXRP; Coinbase for cbXRP; any custodial arrangements linked to legacy ERC-20 wXRP; entities governing locked XRP for bridging or sidechain interactions. |
| Bridge / Messaging Risk | Cross-chain value transmission relies upon bridge contracts and message relayers; vulnerabilities can lead to excessive token minting or hinder redemptive actions. | LayerZero OFT architecture for multi-chain wXRP; Axelar bridge dependencies for eXRP; any third-party bridges linking XRP across EVM or Solana solutions. |
| Smart Contract / Protocol Risk | Wrapped tokens hinge upon smart contracts subject to governance frameworks; bugs or malicious alterations could compromise system integrity. | wXRP contracts across Ethereum, Solana, Optimism, HyperEVM; cbXRP contracts on Base; eXRP protocols integrated within XRPL EVM; DeFi protocols listing these assets as collateral or liquidity pool tokens. |
| Redemption / Peg Risk | The assurance that one wrapped token equates to one native XRP is contingent upon efficient minting/burning interactions alongside cooperative issuers/merchants; systemic shocks may disrupt this equilibrium. | Authorized participant model utilized in wXRP transactions; institution-only redemption flows inherent within Coinbase operations; bridge withdrawal delays when reverting back to XRPL. |
| Liquidity Fragmentation | The existence of multiple “XRP” tickers across various chains dilutes order books and market depth; some wrappers may possess robust liquidity whereas others remain fragile. | Native XRP existing solely on XRPL; Hex Trust’s wXRP; legacy ERC-20 versions; cbXRP operating within Base; eXRP deployed on XRPL EVM alongside any future competing wrappers. |
| Regulatory / Compliance Risk | The custodial nature of wrapped assets places them squarely in regulated environments; shifts in enforcement mandates could precipitate abrupt operational changes or service discontinuations. | Hex Trust’s regulated custody mechanisms; Coinbase’s compliance framework governing cbXRP; RLUSD-wrapped pairs operating within KYC-compliant exchanges; |
| Operational / Key Management Risk | The reliance upon operational protocols alongside key security measures introduces vulnerability through human errors or compromised credentials that could yield catastrophic outcomes. | Custodial frameworks securing underlying XRP; multisig configurations or Hardware Security Modules (HSMs) safeguarding bridge contracts alongside token integrations; |
| Narrative / Functional Drift | The transition into wrapped forms paired with stablecoins could shift the perceived utility of XRP from a payments asset towards volatile collateral usage within DeFi ecosystems. | wXRP-RLUSD pairings throughout Ethereum/Solana markets; DeFi protocols treating wrapped forms chiefly as yield-bearing collateral rather than transactional mediums. |
Evaluating Infrastructure Versus Wrapper Theater
The ongoing expansion can be critically assessed through four pivotal inquiries designed to ascertain whether these developments enhance market infrastructure or merely layer synthetic complexities without alleviating systemic risks:
- Who is responsible for holding the underlying XRP? Are custodial regimes clearly defined? Regulatory oversight from entities such as the New York Department of Financial Services enhances user protection against custody failures while Ripple’s acquisition of a national bank charter adds further legitimacy to its operational framework.
- What dependencies exist between end-users and native XRP? Users engaging with wrapped variants must navigate through multiple dependencies involving custodial reserves and cross-chain communication channels—a stark contrast from the direct consensus reliance inherent within native XRPL operations.
- What economic function does XRP fulfill post-wrapping? If RLUSD emerges as a more stable institutional settlement medium compared to volatile wrapped variants like XRP itself, this may reframe how market participants utilize these assets beyond mere transactional purposes.
- Are risks adequately compensated for their transparency? Bridges remain a notorious vulnerability point within decentralized finance ecosystems—any marginal benefits derived from using wrappers must be weighed against opaque custodianship coupled with experimental bridging protocols that present asymmetric risk-return profiles compared to traditional solutions.
The Paradigm Shift: From Liquidity Expansion to Custodial Dependence
XRP’s burgeoning presence across Ethereum, Solana, Base networks alongside its deployment onto the XRPL EVM sidechain represents not merely an evolution towards decentralization but rather a calculated exchange between liquidity access and custodial dependency. While wrappers enhance market participation by integrating deeper liquidity pools alongside sophisticated protocol functionalities,
For institutional stakeholders contemplating capital allocations towards wrapped representations of XRP—the decisive evaluation should pivot away from whether these developments extend reach but rather focus intently on whether custodial infrastructures paired with bridging technologies deliver reliability standards commensurate with those established by native ledger operations. The current architecture may function effectively under stable conditions; however, critical scrutiny must be applied when considering potential failure scenarios arising from unforeseen disruptions.
