On XRPL, confidential tokens can never charge a percentage transfer fee
Serguey Asael Shinder2 min readA discussion opened on 22 September in the XRPL-Standards repository draws out a consequence of XLS-96, the specification for confidential multi-purpose tokens (MPTs), that is written in the spec but easy to miss: an issuer can have confidential balances or a native percentage transfer fee, but never both - and the choice is permanent.
The author, posting as poetsd, ran the confidential MPT lifecycle end to end on Devnet and published a script that reproduces the result in about three minutes. Setting TransferFee to 250 on a confidential issuance is rejected with tecNO_PERMISSION, and so is enabling confidential balances on an issuance that already charges a fee. Because the flag that allows confidential balances cannot be cleared once set, an issuer that turns on confidentiality gives up native transfer fees for good, and an issuer already charging a fee cannot adopt confidentiality without reissuing under a new issuance ID - losing holders, authorisations and history.
The author does not dispute the reasoning in the specification: a percentage fee needs the amount, and a confidential send hides it. The point raised is who is affected. XLS-96 positions confidential tokens for institutional and privacy-sensitive uses, such as real-world assets and treasuries - the issuers most likely to charge a servicing or distribution fee in basis points. The discussion asks whether a flat per-transfer fee would be compatible, since it does not need the amount; whether fees could be assessed at conversion into or out of confidential balances, where the amount is already public; and whether either was considered. It also proposes a FAQ entry stating the trade-off plainly, since enabling confidentiality is irreversible.
What it means
Privacy features often trade away things that depend on seeing values, and fees are one of them. What makes this case notable is the combination of an irreversible flag and a trade-off documented only in the specification's detailed sections. An issuer can make a permanent decision without meeting the consequence in the places most people read.
The questions are open, with no replies yet. The practical takeaway for issuers evaluating confidential MPTs is to settle their fee model first.