Blog Article

As blockchain infrastructure matures, financial institutions are increasingly looking to offer on-chain products without exposing their existing infrastructure and clients to intricate network mechanics. Customers want access to tokenized assets, stablecoins, or other forms of digital assets while retaining full control over their accounts. They do not want to manage network fees, fund reserves, or navigate blockchain-specific onboarding steps.

‍

On the XRP Ledger, every account requires a minimum XRP reserve, ledger objects such as trustlines require additional reserves, and every transaction incurs a network fee. For institutions with firm restrictions or processes on digital assets, this creates friction… they cannot hold XRP in client accounts, yet network participation requires it.

‍

A recently introduced protocol feature addresses this by introducing sponsorship, separating ownership from responsibility for network costs. In collaboration with Ripple and the XRPL developer community, Ctrl Alt has helped design the amendment, XLS-68d, that enables “Sponsored Fees & Reserves,” supporting the adoption of tokenized assets and digital infrastructure by governments and financial institutions.

Sponsored Fees and Reserves

A ‘Sponsor’ is an account that pays network costs on behalf of another account, called the ‘Beneficiary’. Beneficiaries retain control over their keys and wallets, while the Sponsor assumes responsibility for fees and reserves. This model covers:

‍

  • XRP reserves required to activate accounts and ledger objects
  • Transaction fees for payments, transfers, mints, and swaps

‍

From a user perspective, wallets can exist, transact, and hold assets without ever acquiring or managing XRP for reserve and transaction fees. From the platform’s perspective, costs are predictable, centralized, and manageable.

‍

Sam Allister, Senior Product Manager at Ctrl Alt said,

‍

“This feature solves a real deployment problem. Institutions with seamless on-chain integrations cannot ask end users to fund XRP wallets. Sponsorship lets the ledger rules remain intact while removing that burden from the user journey, creating a seamless user experience for institutional-grade tokenization projects.”

‍

Walter Bester, Principal Software Engineer at Ctrl Alt said,

‍‍

“Sponsorship puts responsibility for network costs on the integration rather than the end user. Instead of transferring XRP into a wallet the user controls, we submit a sponsorship transaction, so the reserve stays with us as the Sponsor, while users retain full ownership and control of their wallets on-chain. When an investor exits, we reclaim it and redeploy it to sponsor the next, letting us fund wallets securely at scale.”

How Sponsorship Works in Practice

Sponsorship operates across three layers of the ledger:

‍

1. Sponsored Account Reserves
   Every XRPL account must hold a minimum balance (currently 1 XRP, about $1.06, as of July 29, 2026) to be active. This was originally a security measure designed into XRP. Sponsorship allows a platform to fund this reserve on behalf of the user.
   
     • The user accepts a sponsorship request and the wallet becomes active instantly.
      • If the wallet churns or becomes defunct, the Sponsor can reclaim the reserved XRP from that wallet. If the user wants to keep the wallet, they can choose to fund the account themselves or find a new sponsor.
   
   This approach allows institutions to activate accounts without touching XRP themselves. The Sponsor effectively delegates trust and asset positions to the wallet while clients retain full control over their keys.
   
   
2. Sponsored Object Reserves (e.g., Trustlines)
   Many assets require trustlines, and each trustline requires an additional reserve. Without sponsorship, platforms must manually fund each trustline, which is operationally expensive and error-prone at scale.
   
   With sponsorship:
     • The Sponsor funds trustline reserves for specific tokens.
      • Users can transact immediately without holding XRP.
      • Sponsored trustlines remain fully auditable, and reserves can be reclaimed if necessary.
   
   This model removes the biggest operational bottleneck for onboarding large numbers of institutional investors.
   
   
3. Sponsored Transaction Fees
   Sponsors can also cover transaction fees. After a one-time authorization from the user:
   ‍
      • All future transactions can be charged to the Sponsor.
      • Payments, mints, swaps, or transfers proceed without the end-user needing XRP.
      • Transactions are authorized and queued only if the Sponsor has sufficient funds to cover costs - if there are not sufficient funds, the transaction will be held.
     • Note: XRP is still burned as a transaction fee, but this fee will be covered by the sponsor.
   
   This allows institutions to deliver a familiar, legacy experience to their users or clients while maintaining full control over all transactions. Sponsors can also transfer sponsorship if needed, such as when a partner institution like Ripple steps in, ensuring flexible operational flows.

Operational Control and Lifecycle Management

The model is designed for real-world operational needs, and we have tailored it to be compatible with institutional-grade tokenization:

  • Sponsors define which wallets, tokens, and actions are eligible for sponsorship.
  • Sponsored reserves can be reclaimed or transferred.
  • Lifecycle events are cleanly managed: closing an account returns XRP to the Sponsor, and trustline reserves can be unwound if no longer needed.
‍

This ensures predictable cost management, clean accounting, governance and operational scalability.

Why This Matters for Financial Institutions

Sponsored fees and reserves remove several critical friction points for regulated institutions:
‍

Simplified onboarding - Users do not need to pre-fund wallets, acquire XRP, or configure trustlines, they interact only with assets they are approved to hold. Institutions that cannot hold or easily obtain XRP can also access tokenized assets on XRPL through a sponsored route.
‍

Operational efficiency at scale - Platforms no longer need to manually distribute XRP to thousands of addresses. Trustline creation and transaction initiation are automated at the protocol level, reducing errors and cost overhead.
‍

Governance and auditability - Sponsors maintain visibility into costs, retain the ability to reclaim funds, and ensure that client accounts never breach internal compliance policies.

Institutional Use Cases

Banks distributing tokenized assets - Banks can onboard clients to hold bonds, deposits, or money-market instruments on-chain without exposing clients to XRP. Clients maintain control over keys while the bank manages network costs internally.
‍

Tokenization platforms - Platforms can sponsor trustlines for investors or clients, enabling instant asset distribution while maintaining custody, auditability, and lifecycle control.
‍

This model was designed with production deployments in mind, such as the Dubai Land Department's Real Estate Tokenization Project, where sponsored reserves and fees would allow compliant participation without exposing users to network mechanics. Ctrl Alt runs the tokenization and on-chain mechanics, while distribution partners provide an end-user interface that requires no on-chain interaction for its users.

Engineered for Institutional Markets

Sponsored fees and reserves do not change asset standards or compliance requirements. They shift responsibility for network costs to the Sponsor, allowing users to interact with assets directly without managing blockchain mechanics.  For institutions adopting on-chain solutions within existing infrastructure, this approach will streamline operations and reduce friction for established financial workflows.

‍

Voting for this protocol amendment is currently in progress and can be tracked here.