XRP Ledger Set for Major Upgrade
The XRP Ledger (XRPL) is poised for a significant upgrade, set to introduce an Automated Market Maker (AMM) pool for Ripple USD (RLUSD). This transformation is enabled by amendment XLS-73d, which has already achieved the required 80% validator consensus and will officially go live today, January 30, 2025, at 7:37 PM UTC. The amendment is expected to enhance XRP liquidity and expand trading opportunities on XRPL’s decentralized exchange (DEX).
Why This Upgrade Matters
AMMs play a crucial role in decentralized finance (DeFi) by allowing users to trade assets without relying on traditional order books. XRPL integrated AMM functionality in March 2024, enabling participants to earn rewards by providing liquidity in selected pools.
However, RLUSD—Ripple’s stablecoin, launched last month—has been restricted from AMM pools due to a regulatory mechanism known as the clawback feature. This feature permits token issuers to reclaim assets in cases involving regulatory concerns, criminal activity, or sanctions violations.
Since the clawback feature was introduced in February 2024, XRPL’s existing rules have prohibited clawback-enabled tokens like RLUSD from participating in AMM pools. As a result, RLUSD holders have missed out on opportunities to contribute liquidity and engage in automated trading within the XRPL ecosystem.
To resolve this issue, the XRPL community proposed amendment XLS-73d, modifying the way clawback-enabled tokens interact with AMM pools. The proposal gained overwhelming support, with 91.43% of validators voting in favor—well above the 80% approval threshold.
How the AMMClawback Amendment Works
The XLS-73d amendment introduces a new mechanism called AMMClawback, which allows token issuers to reclaim assets from AMM pools if the token has the clawback feature enabled. This ensures that issuers can maintain regulatory compliance while still permitting their tokens to be utilized in automated liquidity pools.
Key details of the amendment include:
- If a token issuer freezes an asset in an AMM pool, users will no longer be able to deposit the paired asset into that pool.
- If a wallet is not authorized to hold a clawback-enabled token in an AMM pool, it will be restricted from depositing the paired asset.
- Instead of using the standard Clawback transaction, issuers must utilize the AMMClawback feature to retrieve assets from AMM pools.
These changes strike a balance between regulatory safeguards and DeFi expansion, allowing stablecoins like RLUSD to benefit from AMM liquidity mechanisms.
Impact on the XRPL Ecosystem
Once the amendment is live, an XRP/RLUSD AMM pool will become a reality, potentially improving liquidity for both assets. Ripple’s CTO David Schwartz previously noted that RLUSD’s integration could significantly enhance XRP’s liquidity.
The XRPL community is optimistic about the growth in DeFi activity following this update. A well-known XRPL meme coin account recently emphasized the significance of XLS-73d, stating that the amendment will make XRPL the fastest, cheapest, and safest platform for trading assets.
As XRPL continues to evolve, this upgrade could mark a major step forward in its DeFi ecosystem, fostering wider adoption and expanding its utility in the crypto market.
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