In a notable move for the cryptocurrency market, asset management firm 21Shares has officially filed for a spot XRP exchange-traded fund (ETF) with the US Securities and Exchange Commission (SEC). This announcement, made on November 1, demonstrates the firm’s strategy to capitalize on the growing interest in digital assets, particularly those governed by regulatory scrutiny. 21Shares submitted an S-1 form to register its Core XRP Trust shares for listing on the Cboe BZX Exchange. With Coinbase, the largest cryptocurrency exchange in the United States, set to act as custodian for the fund, it marks a significant step towards mainstream adoption of XRP as an investment vehicle.
The push for a spot XRP ETF comes on the heels of 21Shares’ successful launch of spot Bitcoin and Ethereum ETFs earlier this year, both of which received SEC approval. The firm’s Bitcoin ETF (ARKB), which was created in collaboration with Ark Invest, has already attracted significant inflows, totaling $2.6 billion. Similarly, the Ethereum ETF (CETH) has garnered over $21.8 million. This growth illustrates a shift towards more established and regulated cryptocurrency investments, reinforcing the perception of ETFs as safer entries into the crypto space for traditional investors.
The Core XRP Trust is designed as a passive investment vehicle. Unlike traditional ETFs that may engage in trading and speculation, the Trust aims solely to track the price of XRP, avoiding any strategies that could introduce risk through leverage or derivatives. Its objective is to mirror the performance of the CME CF Ripple-Dollar Reference Rate, meticulously considering expenses and liabilities. However, the Trust notably does not grant direct exposure to XRP itself, allowing investors access to XRP’s market only through traditional brokerage accounts. This approach minimizes the complexities and potential risks associated with directly holding or transferring XRP.
Despite the optimism from firms like 21Shares and Ripple’s CEO Brad Garlinghouse, the road to a spot XRP ETF approval remains fraught with challenges. The SEC’s history of rejecting similar applications, primarily due to ongoing legal disputes with Ripple Labs regarding the classification of XRP as a security, casts a shadow over these ambitions. Since the SEC’s allegations that Ripple raised $1.3 billion through unregulated sales of XRP dampen expectations, its recent judgment stating that XRP is not considered a security when sold programmatically offers a glimmer of hope; however, this ruling is currently under appeal.
Notably, other firms such as Canary Capital and Bitwise also aim to gain approval for their own spot XRP ETFs, indicating a burgeoning institutional interest despite the regulatory landscape’s uncertainty. This collective ambition could signal a robust market appetite for diversified investment options within the cryptocurrency ecosystem, presenting potential opportunities for investors, conditioned upon regulatory developments. The landscape is evolving, and as more asset managers delve into crypto ETFs, the financial community eagerly awaits clarity from the SEC, which could ultimately reshape the future of XRP and its potential role as an investment asset.
