Ripple's XRP Ledger has just completed an important upgrade. The formal activation of the "Credentials" amendment brings native decentralized identity verification and compliance control mechanisms to XRPL.

The core function of this system is to allow trusted issuers to create on-chain certificates for users, proving that they have completed KYC/AML compliance requirements. The entire process meets regulatory demands while protecting user privacy.

The technical implementation is quite clever. Certificates can be verified on-chain without exposing specific personal information. When users interact with applications that require specific compliance standards, they only need to verify that they hold valid certificates, without the need to repeatedly submit personal documents.

This feature will be integrated into core transaction types such as payments and custody, laying the foundation for future implementation of licensed domains and licensed DEX. For applications that must strictly comply with securities regulations, this is simply timely.

Ripple engineers indicate that enterprises can define the types of credentials they need, issued by trusted parties, which users accept and store in their accounts. Subsequently, during each interaction, the credentials can be automatically checked.

The profound impact of this upgrade lies in addressing the biggest pain point of real-world asset tokenization: compliance. The tokenization of traditional assets such as real estate, stocks, and bonds must undergo strict scrutiny of investor identities. With native on-chain KYC/AML solutions, the threshold for institutions to enter the tokenization market will be greatly reduced.