In a significant move for the cryptocurrency market, asset management company 21Shares has submitted a formal application to the US Securities and Exchange Commission (SEC) for a spot XRP exchange-traded fund (ETF). This application, filed on November 1, aims to register shares of the Core XRP Trust for trading on the Cboe BZX Exchange. Notably, this initiative places 21Shares in direct competition with other financial entities seeking to introduce spot XRP investment solutions amidst ongoing regulatory scrutiny.
The Core XRP Trust is designed primarily as a passive investment vehicle with a straightforward mission: to track the price movements of XRP without engaging in market timing or active trading strategies. By using this passive approach, the Trust aims to simplify the investment process for those wishing to gain exposure to XRP without the complications and risks associated with direct ownership. The fund intends to closely mirror the performance of the CME CF Ripple-Dollar Reference Rate, ensuring that advisors and investors have a reliable benchmark for its performance.
Custodianship and Institutional Confidence
A noteworthy feature of this Trust is the selection of Coinbase, the largest cryptocurrency exchange in the US, as its custodian. This partnership not only lends credibility to the Trust’s structure but also provides investors a traditional avenue to gain indirect access to XRP. By circumventing the traditional hurdles related to holding digital assets, such as security concerns and transferring difficulties, 21Shares is effectively democratizing access to crypto investments.
The optimism surrounding the potential success of XRP investment products is reflected in 21Shares’ previous triumphs. Earlier in the year, the company launched successful spot Bitcoin and Ethereum ETFs, with the Bitcoin ETF (ARKB) gathering an impressive $2.6 billion in net inflows, while the Ethereum ETF (CETH) amassed $21.8 million. Such figures demonstrate a burgeoning interest from institutional investors in crypto assets, which 21Shares seems eager to capitalize on with its latest offering.
The Regulatory Landscape: Hurdles Ahead
However, the path to XRP ETF approval is fraught with challenges. The SEC has yet to greenlight any spot XRP ETF applications, largely due to the agency’s protracted legal battle with Ripple Labs. The SEC contends that Ripple raised $1.3 billion through unregistered sales of XRP, framing it as a securities issue. While a recent ruling in 2023 clarified that XRP is not considered a security when traded programmatically on exchanges, the legal complexities remain unresolved and appeal processes are ongoing.
Despite these hurdles, Ripple’s CEO Brad Garlinghouse has remained optimistic about a future SEC approval for an XRP ETF. He cites the recent approvals for Bitcoin and Ethereum ETFs as a hopeful signal that regulatory attitudes may shift. The appetite for such financial products is evident, as other asset managers—including names like Canary Capital and Bitwise—are also vying for approval to launch their own spot XRP ETFs.
21Shares’ recent application for a spot XRP ETF marks a pivotal moment for the cryptocurrency investment landscape. While the regulatory uncertainty surrounding XRP persists, the strong interest from institutional players indicates that the market is primed for further innovation and growth. As these dynamics unfold, the ripple effects of regulatory decisions will undoubtedly shape the future of cryptocurrency investment vehicles in the coming years.
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