- XRPL has introduced AMM pools for Ripple’s USD (RLUSD)
- XRPL AMMClawback enhances the layer-1 network by eliminating traditional order blocks
XRPL AMMClawback upgrade goes live
After months of speculations, XRP Ledger has finally upgraded the AMMClawback amendment to improve regulatory compliance for AMM pools.
According to XRP.org, the new amendment introduces new guidelines for liquidity providers, especially on tokens that have regulatory requirements. Therefore, the upgrade will facilitate token providers to retrieve assets from AMM pools under defined conditions.
As such, if a certain asset or token is frozen, users cannot use the same liquidity pool to deposit new assets. This will help in preventing any associated transactions involving these frozen assets, thus enhancing regulatory compliance.
AMMClawback role in XRP/RLUSD
Notably, this upgrade is even more significant for RLUSD. This, because the AMMs will eliminate the need for traditional order books – Allowing smooth and seamless trading and liquidity provisions.
Therefore, RLUSD holders will enjoy rewards from liquidity pools since the new feature allows RLUSD participation in AMM pools.
Importantly, the upgrade encouraging the XRP/RLUSD AMM pool will greatly enhance liquidity for both assets. As such, trading activities will become faster, cheaper, and safer, transforming XRPL into a major digital asset.
AMM guidelines for liquidity providers
The new upgrade introduces various rules and guidelines, for users and liquidity providers. First of all, for regulatory reasons, some issuers must have the ability to recover issued tokens after they are distributed to accounts.
For example, if an issuer discovers that tokens were sent to an account sanctioned for illegal activity, the issuer could recover the funds.
Secondly, unauthorized accounts can deposit only once if the paired asset is allowed. As such, token providers will have to use the AMMClawback function to retrieve assets from pools. This mechanism is vital as it will offer a better approach to enforcing compliance without affecting usual trading activities on the XRPL.
What does this mean for XRP?
Well, the new upgrade is good news for the XRP network since it has struggled to grow. While XRP’s price has surged over the last 3 months, its network has struggled to keep pace.
Source: Santiment
For instance, XRPL DEX AMM volume declined from 3.85 million to 639.9k.
This drop suggested that fewer traders are actively swapping assets on the XRPL DEX. Thus, liquidity providers are withdrawing funds resulting in slippage for trades. To put it simply, fewer participants are actively engaging with the market.
Source: CryptoQuant
This fall can be further validated by a sharp decline in XRP’s active addresses. For instance – The number of active participants declined from 63.3k to 37k over the past month.
Therefore, the new AMM upgrade offering more rewards for providers could incentivize market makers to actively participate. The AMMClawback upgrade could result in new trading opportunities, thus raising the adoption rate for the network.
Equally, reluctant investors who have avoided the network over security and regulatory concerns can now enter the market. This will not only position XRPL as a powerhouse in the DeFi ecosystem, but also facilitate XRP’s growth on the price chart.
