New Horizons for XRP: 21Shares Steps into the ETF Ring

New Horizons for XRP: 21Shares Steps into the ETF Ring

In a significant development within the cryptocurrency landscape, asset management firm 21Shares has made strides to introduce a spot XRP exchange-traded fund (ETF) by filing an application with the U.S. Securities and Exchange Commission (SEC). As of November 1, 21Shares submitted an S-1 form aimed at registering its Core XRP Trust shares for listing on the Cboe BZX Exchange. This move positions 21Shares alongside other firms eager to navigate the complexities of ETF approvals in a landscape marked by regulatory scrutiny.

Coinbase, recognized as the largest cryptocurrency exchange in the United States, will hold the role of custodian for the proposed fund. This strategic partnership is anticipated to bolster investor confidence, especially as 21Shares has already witnessed notable success with its spot Bitcoin and Ethereum ETFs earlier this year. The Bitcoin ETF, co-developed with Ark Invest, has attracted an impressive $2.6 billion in net inflows, underscoring the appetite for crypto investment products among institutional participants. Meanwhile, the Ethereum ETF has garnered $21.8 million since its inception.

The Core XRP Trust adopts a passive investment approach, primarily designed to track the price performance of XRP. Rather than actively trading or attempting to capitalize on market fluctuations, the fund seeks to mirror the performance of the CME CF Ripple-Dollar Reference Rate, after accounting for relevant expenses and liabilities. Importantly, the Trust will refrain from using leverage, derivatives, or risky financial strategies, thus ensuring a straightforward investment vehicle for participants.

It is crucial to note that the Trust does not provide direct exposure to XRP itself. By offering indirect access, 21Shares aims to reduce the risks typically associated with holding cryptocurrencies, such as taking possession of XRP directly or engaging in transactions on spot markets. Through a conventional brokerage account, investors can tap into XRP’s market potential with a lower barrier to entry, which might appeal particularly to cautious investors looking to explore this promising asset class.

Despite the optimism surrounding this initiative, the approval timeline for the XRP ETF remains uncertain, given the ongoing legal battles between the SEC and Ripple Labs, the entity that launched XRP. Since 2020, the SEC has leveled accusations against Ripple for allegedly raising $1.3 billion in unregistered securities sales. While a favorable ruling in 2023 indicated that XRP is not classified as a security when traded programmatically, the case is still under review. Ripple’s CEO, Brad Garlinghouse, remains hopeful that the SEC’s recent acceptance of Bitcoin and Ethereum ETFs will pave the way for XRP’s inclusion in this investment vehicle arena.

The pursuit of XRP ETFs by firms like 21Shares, alongside competitors such as Canary Capital and Bitwise, reflects a burgeoning interest in diversifying cryptocurrency investment options despite an unstable regulatory environment. As these asset managers push through with their applications, the potential establishment of an XRP ETF would not only create new investment avenues but also signify a shift in institutional sentiment towards cryptocurrencies, illuminating paths previously shrouded in regulatory ambiguity. The potential approval of these ETFs could herald a new chapter for XRP and the wider crypto industry.

Regulation

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