In the ever-evolving landscape of cryptocurrency investment, the introduction of exchange-traded funds (ETFs) has emerged as a critical development. Recently, 21Shares, a leading asset management firm, made headlines by filing an application with the U.S. Securities and Exchange Commission (SEC) for a spot XRP ETF. This initiative underscores a growing institutional interest in XRP investment, despite substantial regulatory hurdles that have characterized the cryptocurrency industry, particularly concerning XRP.
21Shares and Its Groundbreaking Filing
On November 1, 21Shares submitted an S-1 registration form aimed at listing its Core XRP Trust shares on the Cboe BZX Exchange. Coinbase, the largest cryptocurrency exchange in the United States, has been designated as the fund’s custodian, lending an air of credibility to the undertaking. This move comes on the heels of 21Shares’ previous success in launching approved spot Bitcoin and Ethereum ETFs earlier this year, proving their competence in navigating the complex regulatory landscape. Notably, their Bitcoin ETF, ARKB, has attracted an impressive $2.6 billion in net inflows, while the Ether counterpart, CETH, has seen a modest $21.8 million in engagement.
The Core XRP Trust is designed as a passive investment option that aims to track the price movements of XRP without engaging in active trading strategies. It strives to follow the CME CF Ripple-Dollar Reference Rate, calculated by CF Benchmarks Ltd., ensuring a methodical approach to asset management. By avoiding leverage and derivatives, the Trust presents itself as a secure investment vehicle, catering primarily to risk-averse investors looking for exposure to the cryptocurrency market.
One of the notable aspects of the Trust is its approach to providing indirect exposure to XRP. Rather than investors directly holding XRP, the Trust allows them to engage with the cryptocurrency market via traditional brokerage accounts. This innovative structure potentially lowers risks associated with the complexities of cryptocurrency wallets and transfers.
Despite the positive strides made by firms like 21Shares, the road to ETF approval remains fraught with challenges. The SEC has a history of cautiousness regarding spot XRP ETFs, primarily due to its ongoing legal battle with Ripple Labs. Since 2020, the SEC has maintained that Ripple’s sales of XRP constituted unregistered securities transactions, raising barriers to institutional acceptance. However, a recent court ruling indicated that XRP sold on exchanges does not qualify as a security, suggesting that the tides may slowly be turning in favor of XRP.
The Future of XRP ETFs
Ripple CEO Brad Garlinghouse has expressed cautious optimism regarding the SEC’s potential approval of an XRP ETF, particularly considering the acceptance of similar products for Bitcoin and Ethereum. This sentiment is echoed by other asset management firms, like Canary Capital and Bitwise, which are also pursuing spot XRP ETF approvals, signaling an enduring institutional belief in the asset. As the cryptocurrency market continues to mature, the desire for more accessible investment avenues, particularly through regulated means like ETFs, indicates that the appetite for XRP and other cryptocurrencies will likely persist.
While 21Shares’ filing for a spot XRP ETF represents a significant step for both the firm and the cryptocurrency community at large, the approval process remains uncertain. Nevertheless, the growing interest from institutions hints at a future where digital assets may become more integrated into mainstream investment portfolios.