The asset management firm 21Shares has become the latest participant in the competitive race to establish spot exchange-traded funds (ETFs) focused on XRP. On November 1, the company submitted its S-1 registration form to the U.S. Securities and Exchange Commission (SEC), aiming to list its Core XRP Trust shares on the Cboe BZX Exchange. This application follows the growing trend of digital asset management, seeking to broaden investors’ access to cryptocurrencies through regulated investment vehicles.
In a notable aspect of this venture, Coinbase, one of the largest cryptocurrency exchanges in the United States, is designated as the custodian for the fund. This partnership highlights the importance of trust and security in the cryptocurrency ecosystem. Unlike traditional ETFs, the Core XRP Trust is designed as a passive investment vehicle. Its primary objective is to track the price of XRP, intentionally steering clear of strategies involving leverage or direct market manipulation. The Trust seeks to emulate the performance of the CME CF Ripple-Dollar Reference Rate, which is established by CF Benchmarks Ltd., allowing it to predict XRP’s market movements reasonably accurately without additional investment risks.
An interesting characteristic of the Core XRP Trust is its indirect approach to XRP investments. By not directly offering exposure to XRP itself, the Trust allows investors to engage with the cryptocurrency through traditional brokerage accounts, reducing the technical complexities and risks usually associated with buying and holding XRP directly. This design aims to create a more approachable pathway for institutional and retail investors alike, as it circumvents common fears regarding cryptocurrency transactions, such as security breaches and compliance challenges.
Despite the positive innovations brought forth by 21Shares, the outlook for receiving SEC approval appears grim. No spot XRP ETFs have secured regulatory green lights since the SEC’s ongoing legal disputes with Ripple Labs, the entity behind XRP. Since 2020, the SEC has claimed that Ripple raised $1.3 billion via unregistered sales of XRP. Nevertheless, a ruling in 2023 concluded that XRP is not considered a security when sold programmatically on exchanges, though this judgement remains under scrutiny as legal appeals continue.
Ripple’s Chief Executive Officer, Brad Garlinghouse, expressed cautious optimism regarding the potential approval of an XRP ETF, particularly given the SEC’s recent endorsements for Bitcoin and Ethereum ETFs. This sentiment reflects a broader belief within the investment community that regulatory acceptance for digital asset products is gradually evolving. Additionally, other asset managers, including Canary Capital and Bitwise, are also charting paths for their own spot XRP ETFs, indicating robust institutional interest despite the prevailing regulatory uncertainty.
While 21Shares’ application for a Core XRP Trust epitomizes the growing institutional appetite for cryptocurrency access through ETFs, substantial regulatory barriers and competitive dynamics continue to shape the landscape. The unfolding relationship between the SEC and cryptocurrencies will undoubtedly influence future opportunities for investors in the digital asset space.
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