Asset management firm 21Shares has recently made a significant move by filing an S-1 application with the US Securities and Exchange Commission (SEC) for a spot XRP exchange-traded fund (ETF). This development comes amidst Ripple’s legal battles, which have raised questions about the likelihood of SEC approval for an XRP-related ETF.
The Core XRP Trust, as proposed by 21Shares, is designed to operate as a passive investment vehicle. It aims to track the price of XRP without engaging in activities to generate additional returns, such as buying or selling based on market trends. The Trust will not utilize leverage, derivatives, or similar strategies for its assets, focusing instead on mirroring the performance of the CME CF Ripple-Dollar Reference Rate after accounting for expenses and other obligations.
It is important to note that the Core XRP Trust does not provide direct exposure to XRP. Rather, it offers investors indirect access to the XRP market through a traditional brokerage account, thereby reducing barriers and risks associated with holding or transferring XRP directly or purchasing it from an XRP spot market.
Despite the innovative approach taken by 21Shares, the prospects of an XRP ETF approval remain uncertain. The SEC has yet to approve any spot XRP ETFs, primarily due to the legal dispute between the regulatory body and Ripple Labs. The SEC has accused Ripple of conducting unregistered XRP sales amounting to $1.3 billion, leading to a prolonged legal battle.
Although a 2023 ruling determined that XRP was not a security when traded programmatically on exchanges, the case is still subject to appeal. This legal ambiguity has created challenges for firms seeking approval for XRP ETFs, including 21Shares. However, Ripple’s CEO, Brad Garlinghouse, remains hopeful about the eventual approval of an XRP ETF by the SEC, citing recent approvals for Bitcoin and Ethereum ETFs.
In addition to 21Shares, other asset managers like Canary Capital and Bitwise are also actively pursuing approval for their spot XRP ETFs. This collective effort underscores strong institutional interest in expanding investment options related to XRP, despite the regulatory uncertainties surrounding the digital asset.
Overall, the filing of an S-1 application by 21Shares marks a significant development in the realm of cryptocurrency ETFs, particularly in relation to XRP. While regulatory challenges persist, the industry’s continued efforts to introduce innovative investment products reflect a growing demand for diversified and accessible investment opportunities in the digital asset space.
