The recent move by asset management firm 21Shares to file for a spot XRP exchange-traded fund (ETF) highlights an emerging trend in the cryptocurrency investment landscape. On November 1, 21Shares filed an S-1 form with the U.S. Securities and Exchange Commission (SEC), aiming to register its Core XRP Trust shares for trading on the Cboe BZX Exchange. With the backing of Coinbase, the largest cryptocurrency exchange in the United States, as the custodian, this initiative demonstrates significant institutional interest in expanding cryptocurrency investment avenues, particularly for XRP.
21Shares has a proven track record in the ETF space, exemplified by its successful launches of spot Bitcoin and Ethereum ETFs earlier this year. Notably, its Bitcoin ETF, ARKB, developed in collaboration with Ark Invest, has garnered a whopping $2.6 billion in net inflows, while its Ethereum ETF, CETH, has attracted approximately $21.8 million. These milestones not only showcase 21Shares’ ability to navigate the complex regulatory landscape surrounding cryptocurrencies but also reflect a growing demand for compliant investment vehicles in this domain.
The Core XRP Trust is designed as a passive investment vehicle, focusing solely on mirroring the price of XRP without engaging in active trading strategies that could introduce unnecessary risks. The Trust aims to replicate the performance of the CME CF Ripple-Dollar Reference Rate while considering various expenses and liabilities. Notably, this approach eliminates the use of leverage or derivatives, creating a safer investment environment for its stakeholders. By offering indirect access to the XRP market through traditional brokerage accounts, the Trust lowers the barriers typically encountered when directly dealing in cryptocurrencies, such as custody issues and complex exchange interactions.
Despite the innovative strides being taken by 21Shares and other asset managers, the path to an approved XRP ETF remains fraught with challenges. The SEC’s reluctance to greenlight any spot XRP ETFs is largely influenced by its ongoing legal tussle with Ripple Labs, the company responsible for XRP. The SEC alleges that Ripple raised a staggering $1.3 billion through unregistered XRP sales. Although a recent ruling stated that XRP is not deemed a security when sold on exchanges, the case lingers in the appeals process, casting a long shadow over potential ETF approvals.
Amid this backdrop of legal uncertainty, Ripple CEO Brad Garlinghouse has voiced hope that the SEC will ultimately approve an XRP ETF. His optimism is bolstered by the agency’s previous approvals for Bitcoin and Ethereum ETFs, suggesting a potential shift in the regulator’s stance. Additionally, firms such as Canary Capital and Bitwise are also vying for their spot XRP ETF approvals, signaling a robust institutional interest in diversifying investment strategies related to XRP, despite the regulatory headwinds.
The bid by 21Shares for a spot XRP ETF exemplifies a broader trend of institutional engagement with cryptocurrencies, even as regulatory hurdles loom large. With a solid operational foundation and optimistic forecasts from key industry players, the path forward remains dynamic. However, the future of XRP investment options through ETFs will remain uncertain until the regulatory landscape becomes clearer.
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