Ripple is investing in custody and settlement infrastructure designed to let institutions issue, hold, and trade tokenized assets without relying on centralized exchanges. The company's recent investments in ZILO and Licuido, combined with partnerships enabling institutional lending through wrapped XRP, represent a broader industry pivot toward decentralized custody models that balance security with regulatory compliance.

Why Are Institutions Moving Away From Exchange Custody?

The crypto industry has experienced a wake-up call on centralized exchange risk. In February 2025, North Korean state-linked hackers drained $1.5 billion from the Bybit exchange in a single attack, the largest crypto exchange hack on record. Across 2025 alone, an estimated $2.87 billion was stolen in nearly 150 exchange and platform hacks. These incidents have accelerated institutional demand for alternative custody solutions that don't concentrate assets on a single platform.

Ripple's latest moves directly address this concern. The company invested in ZILO, which provides transfer agency and fund administration technology for tokenized share classes, and Licuido, a UK-regulated platform supporting the issuance, distribution, and trading of traditional assets as digital collateral. The goal is to connect these services with Ripple's XRP Ledger infrastructure, allowing institutions to issue tokenized assets, transfer them between investors, hold them in custody, and use them as collateral without intermediaries.

Mastercard's acquisition of BVNK, a stablecoin infrastructure company that supports XRP deposits and payments, further signals institutional appetite for decentralized settlement layers. Both Ripple and Mastercard are participating in Mastercard's Crypto Partner Program and multi-token network initiative, suggesting that traditional finance is actively building bridges to blockchain-based custody.

What's the Difference Between Self-Custody and Institutional Custody?

Self-custody and institutional custody represent two fundamentally different approaches to holding digital assets. Self-custody means you, and only you, hold the private keys to your crypto without relying on third-party intermediaries. Roughly 59% of crypto wallet users worldwide now prefer self-custody wallets over custodial ones, and self-custody awareness among crypto users sits at around 71%.

However, individual self-custody creates severe operational bottlenecks and single-point-of-failure risks for enterprises. Institutions require Multi-Party Computation (MPC) or multi-signature infrastructure to balance control with compliance. Here's how the two models differ:

• Key Control: Self-custody places keys with one person or a small internal team, while institutional custody distributes keys across MPC or multi-party signing infrastructure.
• Compliance: Self-custody has no built-in audit trail, Know Your Transaction (KYT), or Anti-Money Laundering (AML) tooling, whereas institutional custody includes transaction monitoring and compliance reporting.
• Operational Risk: Self-custody creates a single point of failure if a key holder leaves, loses access, or is compromised, while institutional custody spreads risk across multiple parties and systems.
• Regulatory Alignment: Self-custody wallets don't require personal information to generate an address, preserving privacy, but institutional custody typically requires Know Your Customer (KYC) verification and regulatory oversight.

For institutions managing client or treasury funds, self-custody is generally not the recommended setup at scale. Ripple's infrastructure investments reflect this reality by building custody solutions that maintain institutional-grade security and compliance without forcing assets onto centralized exchanges.

How to Evaluate Custody Solutions for Digital Assets

• Key Management Architecture: Assess whether the custody provider uses MPC, multi-signature, or other distributed key schemes that prevent any single party from unilaterally moving funds.
• Regulatory Compliance: Verify that the custody solution includes built-in transaction monitoring, AML screening, and audit trails required by financial regulators in your jurisdiction.
• Settlement Speed and Cost: Evaluate whether the custody infrastructure enables instant settlement of assets and payments, reducing counterparty risk and operational delays compared to traditional finance.
• Interoperability: Determine whether the custody solution can connect to decentralized finance (DeFi) protocols, lending platforms, and other blockchain services without requiring asset withdrawal to a centralized exchange.
• Backup and Recovery: Confirm that the custody provider has documented procedures for key recovery, account access restoration, and business continuity in case of operational disruption.

Ripple's partnerships demonstrate how these criteria are being met in practice. Flare's wrapped XRP (FXRP) received approval to be used as collateral in an RLUSD lending pool managed by Sentora, with a vault worth $280 million operating through an isolated market on Morpho Blue. Users can deposit FXRP and borrow RLUSD without losing their exposure to XRP, enabling institutional lending without surrendering custody to a centralized platform.

What Does This Mean for Institutional Adoption?

Ripple's custody infrastructure investments signal that institutional adoption of crypto is moving beyond simple buy-and-hold strategies on exchanges. The company plans to use RLUSD, its stablecoin, to provide the settlement side of transactions, allowing assets and payments to settle together and instantly. This creates a complete ecosystem where institutions can issue tokenized securities, hold them in custody, lend against them, and settle transactions without intermediaries.

XRP exchange-traded funds (ETFs) continued to attract capital in July, recording around $27 million in net inflows throughout the month. While this was considerably less than the $60 million registered in June and far below the $132 million in May, the sustained inflows indicate that institutional investors continue to add XRP exposure. The declining monthly totals suggest that institutional momentum may be cooling, but the underlying infrastructure buildout suggests that long-term institutional adoption is accelerating.

The shift toward decentralized custody and settlement represents a fundamental change in how institutions will interact with digital assets. Rather than trusting a single exchange with billions in assets, institutions can now use blockchain-based infrastructure that distributes key management, embeds compliance, and enables instant settlement. Ripple's investments in ZILO and Licuido, combined with Mastercard's acquisition of BVNK, demonstrate that this transition is no longer theoretical; it's becoming operational reality.