Charles Hoskinson, the founder of Cardano (ADA), believes a future integration between Midnight and XRP Ledger–based DeFi could seriously challenge how traditional banks operate.
Midnight is Cardano’s privacy-focused sidechain. It is designed to support smart contracts where sensitive data stays private, but transactions can still meet regulatory requirements.
The key idea behind Midnight is selective disclosure. The information would remain private to the user, and the regulator/institutions would be able to see the required information as needed.
Cardano founder Charles Hoskinson argues that integrating Midnight with XRP Ledger–based DeFi could fundamentally disrupt legacy banking systems.
— TheCryptoBasic (@thecryptobasic) December 31, 2025
In recent commentaries, Hoskinson has outlined plans to introduce more efficient and potentially lucrative yield-bearing…
In contrast, the XRP Ledger is recognized for its fast processing times and low fees. It has also been applied in payments and settlements for several years, particularly in the institutional environment.
The main weakness of XRPL has been DeFi. Unlike Ethereum or Solana, XRP does not have native smart contracts, which has limited the growth of lending, yield products, and more advanced financial tools.
Hoskinson’s argument is that combining these two systems could change that.
In this setup, Ripple’s XRP would handle fast and cheap settlement, while Midnight would bring privacy-enabled smart contracts on top. That would allow DeFi products like lending, yield generation, and asset tokenization to run efficiently, privately, and in a way regulators can still work with.
Moreover, Hoskinson shared that this kind of system could outperform banks in areas where they are weakest. Traditional banks rely on slow infrastructure, multiple intermediaries, and complex back-office processes.
A Midnight–XRPL DeFi stack could settle transactions almost instantly, reduce costs, and automate financial products using code instead of paperwork.
He also points out that this isn’t just theory. Banks already struggle to modernize, while blockchains are built for speed and automation from the start. If privacy and compliance are handled correctly, there is little reason those services need to sit inside legacy systems.
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Hoskinson has made similar comments before, especially around real-world asset tokenization. He said that XRP and Midnight are far ahead of traditional finance in this area.
This sparked a discussion, though even Ripple’s CTO David Schwartz complimented Midnight on their approach to privacy issues, although a rare display of respect was exchanged between both sides.
For now, there is no confirmed timeline or product release. Hoskinson has said more details will come next year.
Still, the message is clear. If privacy-focused smart contracts and Ripple’s XRP settlement layer come together, the result could look a lot like a bank – only faster, cheaper, and built on-chain.
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