A proposed upgrade to the XRP Ledger could allow banks and fintech companies to pay XRP account reserves and transaction fees on behalf of customers, reducing the need for retail users to hold the token themselves.
The Sponsor amendment, based on the XLS-68 Sponsored Fees and Reserves proposal, would allow a business to cover another user’s costs while that customer retained control of their account and private keys.
The change is intended to remove a barrier to financial institutions building products on the network. Customers would not need to acquire or manage XRP before using tokenised assets, payments or other applications.
Jazzi Cooper, Ripple’s head of product, said a bank, issuer or platform could act as the sponsor and pay those costs for its users. That would allow consumer and institutional services to keep much of the underlying XRP mechanics away from the customer experience.
However, the proposal has not yet been approved. XRPScan showed six validators supporting the amendment at press time, below the 29-validator threshold needed, and no activation date has been set.
Banks could carry the reserve requirement
The upgrade would shift the capital obligation rather than remove it.
Under current XRPL parameters, each account requires a base reserve of 1 XRP, while each standard owner-reserve unit requires 0.2 XRP. Validators can alter those figures. If sponsorship is introduced, the XRP backing a customer’s reserve would remain in the sponsor’s account, with the ledger identifying the party responsible.
A company sponsoring 1,000 otherwise empty accounts would therefore take on roughly 1,000 XRP in additional base-reserve obligations. Without sponsorship, that same requirement would be spread across the individual customers.
For a service with 1 million users, the base-account requirement could theoretically amount to about 1 million XRP, before trust lines, token-related objects, optional sponsorship relationships and transaction fees are included. The final figure would depend on how the product was structured.
Optional Sponsorship ledger entries could add to the requirement. They allow businesses to create prefunded sponsorship arrangements instead of authorising every subsidised transaction individually, but each entry also uses reserve capacity.
That could mean broader XRPL adoption does not produce an equivalent number of new retail XRP holders. Banks, payment companies and tokenisation platforms could instead purchase and manage XRP centrally, concentrating ownership among institutional sponsors.
Ctrl Alt, which worked with Ripple and XRPL developers on the proposal, has described the system as a way for institutions to manage XRP requirements internally while customers use tokenised assets without acquiring XRP.
Sponsorship would create a long-term commitment
Sponsors would need to account for XRP remaining committed while an account or ledger object still depends on its reserve. A customer stopping use of a service would not necessarily make those tokens immediately available.
Under the proposed SponsorshipTransfer mechanism, sponsorship could be ended or reassigned. But a customer taking responsibility for an account would need enough XRP to meet the reserve requirement. The sponsor could provide the shortfall, or another sponsor could assume the obligation with its consent.
Where applicable, deleting the account could release the reserve after relevant blockers were cleared. Rules would determine how any remaining XRP was directed.
A code change added to the XRPL development branch in August introduced reserve checks for some sponsorship terminations, but it depends on the separate fixCleanup3_4_0 amendment.
The demand for XRP would ultimately depend on how much new inventory institutions bought, rather than simply how many accounts were sponsored. Data on sponsored accounts, balances, transaction volumes and reserve commitments would show whether businesses were accumulating XRP or reusing existing holdings.
