Hong Kong-based digital asset custodian Hex Trust announced on December 12, 2025, that it will issue and custody wrapped XRP (wXRP), a 1:1-backed representation of the native XRP asset designed to support DeFi activity and cross-chain utility. The launch, which begins on Solana before expanding to Ethereum, Optimism, and HyperEVM, comes with over $100 million in initial Total Value Locked (TVL).
This move is part of a broader push to make XRP available across multiple ecosystems, joining existing offerings like Coinbase's cbXRP on Base and Axelar's eXRP on the XRPL EVM sidechain. The goal is clear: unlock XRP's value in the deep liquidity pools of Ethereum and Solana DeFi and pair it with Ripple's RLUSD stablecoin. However, this expansion fundamentally shifts risk from the XRP Ledger's consensus mechanism to custodial and bridge infrastructure, which has been the single largest target for crypto exploits.
The Bridge as a Chokepoint: Wrapped XRP introduces critical dependencies on centralized custodians and cross-chain bridges, creating new single points of failure absent in the native XRP Ledger.
🔗 Security Visualization | 🔍 Source: CoinTrendsCrypto Analysis
"Bridges have been the single largest target in DeFi exploits... Hacken's 2025 Web3 Security Report showed that over $1.5 billion of the $3.1 billion stolen from crypto services in this year's first half relates to bridges, accounting for over 50% of DeFi losses."
🌉 The Scale of Cross-Chain Risk (2022-2025)
Context: The value locked in wXRP enters an infrastructure layer historically plagued by catastrophic exploits.
The Wrapped XRP Landscape: Proliferation and Promise
Hex Trust issues wXRP tokens 1:1 with native XRP held in its segregated, regulated custody. It uses LayerZero's Omnichain Fungible Token (OFT) standard to synchronize supply across Ethereum, Solana, Optimism, and HyperEVM. Minting and redemption are restricted to authorized merchants via a KYC/AML-compliant flow.
Coinbase offers its own wrapped XRP (cbXRP) on its Base network, following a similar 1:1 custody model but within its own ecosystem.
On the XRPL EVM sidechain, users lock XRP to mint eXRP via the Axelar bridge, which can then be routed to over 80 connected chains, creating another distinct synthetic XRP flow.
The immediate benefit is liquidity. RLUSD has over $1 billion in circulation, mostly on Ethereum. Deep wXRP/RLUSD pairs on major chains give XRP access to deeper order books on Uniswap, Curve, or Raydium, far surpassing the native XRPL DEX. For institutions and DeFi users, this unlocks yield, collateral utility, and better trade execution.
The Risk Migration: From Ledger Consensus to Trusted Intermediaries
This shift trades one risk profile for another. Native XRP is a protocol asset secured by the decentralized XRP Ledger consensus. Wrapped XRP replaces that with a three-layer trust model: a custodian holding the real XRP, a bridge coordinating cross-chain state, and smart contracts managing the synthetic token.
| Risk Layer | Description | Manifestation in wXRP |
|---|---|---|
| Custodian Risk | The entity holding the underlying XRP fails (hack, insolvency, fraud). | Hex Trust holds all wXRP backing. A failure here breaks the 1:1 peg for all chains simultaneously. |
| Bridge Risk | Vulnerabilities in the cross-chain messaging protocol. | LayerZero's OFT stack and Axelar's bridge are critical infrastructure. Bridge hacks have led to the largest losses in crypto history. |
| Redemption Risk | Users cannot convert the wrapped token back to the native asset. | Only "authorized merchants" can mint/redeem wXRP with Hex Trust. If they halt, secondary market holders have no direct redemption path. |
| Fragmentation Risk | Multiple, incompatible wrappers split liquidity and create confusion. | wXRP, cbXRP, eXRP, and legacy ERC-20 wXRP all trade separately. A failure in one could contagiously affect confidence in others. |
The core trade-off is liquidity for counterparty risk. As one crypto expert noted, wrapped assets carry "counterparty, bridge, and custodial risks," while "native XRP is free from these risks, remaining a fast, permissionless settlement layer".
The $1.5 Billion Bridge Problem: A Pre-Baked Vulnerability
The risks are not theoretical. The infrastructure wXRP relies upon is the same that has been systematically exploited for years.
Historical Precedent: Since 2022, over $2.8 billion has been stolen from cross-chain bridges in high-profile exploits like Ronin ($624M), Poly Network ($600M), and BSC Token Hub ($568M). These often involve validator takeover, private key leaks, or smart contract bugs.
2025's Alarming Trend: The first half of 2025 saw $3 billion stolen from crypto services. Bridges accounted for a staggering $1.5 billion of that sum, representing over 50% of all DeFi losses. This trend underscores that as value concentrates in interoperability layers, so does attacker interest.
The Custodian as a Single Point of Failure: The custodial model centralizes risk. As highlighted in analyses of centralized exchange risks, "If an exchange faces insolvency, suffers a security breach, or engages in mismanagement, users risk losing their entire holdings". While Hex Trust is a regulated custodian, the fundamental risk of a single entity controlling the underlying asset remains.
Evaluating the Trade-Off: Infrastructure or "Wrapper Theater"?
For an institution or a user, the decision to use wrapped XRP boils down to critical questions that separate robust infrastructure from potentially fragile complexity:
Who holds the XRP, and what is their track record? Hex Trust positions itself as a regulated custodian. Transparency about audits, insurance, and legal recourse in case of failure is paramount.
Is the risk transparent and compensated? Does the yield or liquidity advantage from using wXRP in DeFi adequately compensate for taking on bridge and custodian risk? Or is it a convenience with asymmetric downside?
💎 The Bottom Line: The launch of wrapped XRP is a significant step for interoperability and a testament to demand for XRP in multi-chain DeFi. However, it is not a risk-free upgrade. It is a calculated trade: accepting concentrated custodial and bridge risks—the very risks responsible for over $1.5 billion in losses in 2025 alone—in exchange for liquidity and utility on foreign chains.
For users, the imperative is to understand that holding wXRP is not the same as holding native XRP. It is a derivative product whose value is backed by a promise and a series of potentially vulnerable technical and legal constructs. The architecture works until it doesn't, and in crypto, the stress test is not a matter of "if," but "when."
FAQ: Wrapped XRP Risks Explained
Is wrapped XRP (wXRP) the same as native XRP?
No. Native XRP exists and is settled on the XRP Ledger. Wrapped XRP is a synthetic token on another blockchain (like Ethereum or Solana) that represents a claim on XRP held by a custodian. Its value depends entirely on the custodian's integrity and the security of the bridge.
Can I redeem wXRP for native XRP myself?
Not directly as an end-user. According to Hex Trust, minting and redeeming wXRP is restricted to "authorized merchants." Regular users must buy/sell wXRP on secondary markets. Your ability to get native XRP back depends on those merchants being operational and liquid.
📚 Sources & References
This analysis is based on publicly available information from reputable sources:
- Hex Trust Announcement: Wrapped XRP Launch (December 12, 2025)
- Hacken Web3 Security Report 2025 (H1)
- Chainalysis Crypto Crime Report 2025
- Ripple RLUSD Circulation Data
- LayerZero Documentation: Omnichain Fungible Token Standard
- Coinbase cbXRP Technical Documentation
- Axelar Bridge Security Architecture
- Historical Bridge Exploit Data (Ronin, Poly Network, BSC Token Hub)
- Regulatory Framework for Digital Asset Custodians (Hong Kong SFC)
About the Author: Isabella Rossi
Isabella Rossi specializes in cryptocurrency market analysis and macro trends. With expertise in interpreting complex market data and identifying structural shifts, she provides data-driven insights into crypto market dynamics. Her analyses focus on practical implications for investors navigating the evolving digital asset landscape.
Disclaimer: This analysis is for informational and educational purposes only. It is not financial, investment, or security advice. The cryptocurrency and DeFi space is inherently risky, with potential for total loss. Wrapped assets carry specific technical, custodial, and counterparty risks outlined herein. Always conduct your own thorough research (DYOR), understand the specific risks of any product you use, and consider consulting with a qualified professional before making any financial decisions.