The cryptocurrency landscape is evolving rapidly, with asset management companies keenly eyeing opportunities in the exchange-traded fund (ETF) market. One of the firms making headlines is 21Shares, which has recently submitted an application to the U.S. Securities and Exchange Commission (SEC) for a spot XRP ETF. This move signifies not only the growing demand for digital asset investment vehicles but also the steadfast belief among some asset managers that regulatory acceptance of such products may be on the horizon.
On November 1, 21Shares filed an S-1 form to launch its Core XRP Trust, aiming for listing on the Cboe BZX Exchange. Coinbase, a leading cryptocurrency exchange, is set to act as the custodian for the fund, which seeks to provide investors with a passive investment option tracking XRP’s price movements. Notably, this ETF would not endeavor to engage in arbitrage or active trading strategies; instead, it aims to replicate the performance of the CME CF Ripple-Dollar Reference Rate, net of any expenses incurred. This approach could appeal to a risk-averse segment of investors aiming to gain exposure to XRP without the complexities and potential hazards associated with direct cryptocurrency ownership.
21Shares has previously gained recognition for successfully launching Bitcoin and Ethereum ETFs, establishing a track record that enhances its credibility. Their Bitcoin ETF, in partnership with Ark Invest, has attracted substantial inflows, underscoring investor trust in the firm’s ETF offerings. However, the success of the Bitcoin and Ethereum ETFs does not guarantee a smooth path for the XRP ETF. The prevailing skepticism regarding the SEC’s willingness to approve any spot XRP ETFs remains a significant hurdle. The agency has yet to greenlight such a fund, largely due to an ongoing litigation with Ripple Labs.
The Ripple Dynamics and Regulatory Challenges
The legal tussle between the SEC and Ripple Labs creates an intricate backdrop for prospective XRP ETF seekers. Since 2020, the SEC has alleged that Ripple conducted unregistered sales of XRP, raising $1.3 billion. Although a court ruling earlier this year determined that XRP, when sold on exchanges, does not qualify as a security, the matter continues to be navigated through appeal processes. Ripple’s CEO, Brad Garlinghouse, remains optimistic about the outcome of the SEC dispute and believes that the regulatory body may eventually approve an XRP ETF, particularly in light of its positive stance towards Bitcoin and Ethereum ETFs.
Institutional Interest Amidst Uncertainty
The landscape is not solely dominated by 21Shares; a number of other asset managers, such as Canary Capital and Bitwise, are similarly pursuing spot XRP ETFs, indicating a robust institutional interest in diversifying digital asset offerings. This intensified push for XRP investment products suggests a growing belief that, despite regulatory hurdles, there exists a significant appetite among investors for exposure to cryptocurrencies.
The quest for a spot XRP ETF signifies a complex interplay of ambition within the asset management industry, legal uncertainties, and evolving regulatory attitudes towards cryptocurrency. As firms like 21Shares forge ahead in their pursuits, the landscape will undoubtedly continue to change, reflecting both the resilience of the cryptocurrency market and the intricate challenges posed by regulatory scrutiny.
