21Shares has uncovered a specific shortfall within the XRP demand landscape. Crypto researcher SMQKE (@SMQKEDQG) brought the firm’s findings to light, pointing out what the report defines as the missing component: XRP used as collateral. While infrastructure readiness is advancing and regulatory clarity is progressing favorably, neither of these factors independently stimulates direct demand for XRP.
According to the firm, the XLS-65/66 proposal represents a significant step forward, as it would enable tokenized assets to function as loan collateral natively on the XRP Ledger.
However, a catch remains. Loans under this framework can be issued in RLUSD or tokenized Treasuries rather than XRP. Although the proposal pushes the ecosystem forward, it does not mandate that XRP be held or utilized as margin.
THE MISSING PIECE IS XRP AS COLLATERAL
“The catalyst that would directly amplify XRP demand is regulated institutions accepting XRP itself as collateral or margin.”
“That has not yet happened.”
A catalyst unlike any other
Documented.
pic.twitter.com/DL6Ve0uPFw
— SMQKE (@SMQKEDQG) October 12, 2026
The Catalyst That Changes Everything
21Shares clearly specifies what would genuinely drive market momentum: “The catalyst that would directly amplify XRP demand is regulated institutions accepting XRP itself as collateral or margin.” That milestone has yet to occur.
The XRP Ledger already positions XRP as a foundational bridge asset linking traditional finance with decentralized finance, a point emphasized in the 21Shares report. On the traditional finance side, applications include treasury management, cross-border payments, collateral, lending, and liquidity management. On the decentralized finance side, features encompass stablecoins, real-world assets, reserve currency functions, decentralized exchanges, and lending protocols. XRP occupies the center of this entire framework.
Collateral is explicitly highlighted in that blueprint as a core use case within traditional finance. While the underlying infrastructure is in place, regulated institutions have not yet integrated XRP into that specific capacity.
Supply Absorption Tells Its Own Story
Evaluating the supply side reveals telling metrics. During the first half of 2026, U.S. spot XRP exchange-traded products absorbed a mere 14.8% of the increase in circulating supply, with ETPs registering as net sellers in two out of those six months.
May served as a notable exception, as ETF absorption accounted for over half of the newly minted supply, marking a record month. Based on the current annual run rate of $588 million, ETPs absorb roughly one-seventh of the yearly net XRP supply. While this indicates a solid baseline, it also highlights the vast potential remaining for demand expansion.
What Institutional Adoption Would Require
For XRP to operate effectively as collateral within regulated spheres, institutions require legal certainty, robust custody infrastructure, and internal risk management policies capable of accommodating a digital asset in that function. Each prerequisite is gradually drawing closer to reality.
SMQKE described this development as “a catalyst unlike any other.” Although XRP already maintains established roles in payments and tokenization, the subsequent phase—institutions retaining XRP for margin or collateral—remains the missing piece that has yet to materialize.