In a notable development within the cryptocurrency market, asset management firm 21Shares has stepped up to the plate by filing an application for a spot XRP exchange-traded fund (ETF) with the U.S. Securities and Exchange Commission (SEC). This filing, submitted on November 1, showcases the firm’s commitment to expanding its offerings in digital asset investments and reflects a broader trend among institutional investors seeking exposure to cryptocurrencies in a regulated framework.
The Core XRP Trust, which is the centerpiece of 21Shares’ application, is designed to function as a passive investment vehicle. Its stated aim is to track the price movements of XRP, the digital asset associated with Ripple Labs. Importantly, the trust is structured to exclude active trading strategies that could introduce risk; it will not employ leverage or derivatives. The benchmark for the trust’s performance will be aligned with the CME CF Ripple-Dollar Reference Rate, calculated by CF Benchmarks Ltd., ensuring clarity and credibility in its tracking mechanism.
By sidestepping direct exposure to XRP, the trust provides a distinctive avenue for investors to engage with the cryptocurrency market. This structure mitigates the risks and complexities of directly holding or transferring XRP, thus catering to a wider range of investors looking to navigate the digital asset space.
A noteworthy aspect of this initiative is the partnership with Coinbase, the largest cryptocurrency exchange in the United States. Coinbase will serve as the custodian for the fund, a decision that infuses a level of reliability given Coinbase’s established reputation in the crypto industry. This custodianship is vital in building confidence among potential investors who may be wary of the risks associated with storing cryptocurrencies.
Despite the optimistic undertone of 21Shares’ initiative, the road to securing SEC approval for a spot XRP ETF remains fraught with challenges. Since 2020, the SEC has been embroiled in a legal battle with Ripple Labs, leading to significant uncertainty around the regulatory status of XRP. Earlier this year, however, a court ruling suggested that XRP might not be classified as a security when sold on exchanges, but the ongoing appeal process means that the outcome remains unpredictable.
Ripple’s CEO, Brad Garlinghouse, has voiced his belief that an XRP ETF will eventually gain approval from the SEC, citing the recent successful launches of Bitcoin and Ethereum ETFs. Nevertheless, this sentiment does not erase the reality of lingering regulatory skepticism, which could hinder the momentum around digital asset ETFs in the short term.
21Shares is not alone in its endeavor; other firms such as Canary Capital and Bitwise are also pursuing similar ETF proposals, signaling robust institutional interest in XRP as an investment vehicle. The ripple effect of these applications demonstrates a growing confidence that institutional frameworks can foster innovation and accessibility in the cryptocurrency market, despite existing regulatory hurdles.
21Shares’ filing for a spot XRP ETF underscores the evolving relationship between traditional finance and cryptocurrency. As institutional players continue to seek ways to integrate digital assets into their portfolios, the success of such initiatives will likely hinge on regulatory clarity and market receptiveness. For investors, the launch of the Core XRP Trust could represent a strategic opportunity to engage with XRP, albeit against a backdrop of ongoing legal and regulatory complexities. The unfolding narrative surrounding XRP, both legally and in investment landscapes, is one to watch closely as the market evolves.
