XRP Ledger developers tighten the rules for who can hold 'restricted' tokens

XRPL's trust-line system lets issuers flag a token as requiring authorization before any account can hold it, a compliance control built into rippled from its early versions. The 2024 addition of an on-chain automated market maker introduced liquidity-pool tokens that could sidestep those checks, letting an account gain exposure to a restricted asset without the issuer's sign-off. fixCleanup3_5_0 bundles four fixes meant to close that gap for stablecoin and tokenized-fund issuers.

One fix blocks unauthorized trust lines from receiving balances outright; another requires both assets in an AMM pool to carry issuer authorization before an account can hold the resulting LP token. Once active, issuers of regulated stablecoins or tokenized funds get a tighter lever to exclude unvetted wallets, including pool-based ones. Exchanges, market makers and liquidity providers will need to verify counterparty authorization before routing through XRPL pools, or risk rejected transfers.

The push is framed explicitly around institutional tokenization: issuers want the same gatekeeping over on-chain assets that securities rules already impose off-chain. That cuts against the open, permissionless transfer model crypto rails were built on, trading some censorship-resistance for compliance comfort. Whether XRPL's bet wins share in the tokenization market depends on issuers valuing that control enough to pick it over chains with looser, or no, authorization gates. (per ambcrypto.com)

Two of the four fixes remain open proposals, still under developer review rather than active network rules. XRPL amendments only activate after sustained supermajority support from validators. The marker to watch is whether fixCleanup3_5_0 moves from review into a formal validator vote; until it does, the trust-line and liquidity-pool authorization gaps the fixes target stay live on mainnet.

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