21Shares, a prominent issuer in the exchange-traded fund (ETF) industry, has recently entered the race to launch an ETF based on XRP, the digital asset linked to Ripple.
According to a Friday filing with the U.S. Securities and Exchange Commission (SEC), 21Shares aims to expand its cryptocurrency offerings and capitalize on investor interest in XRP.
This filing places 21Shares among a growing list of financial firms vying to introduce ETFs tied to cryptocurrencies, as the demand for crypto-related investment products continues to grow in mainstream markets.
21Shares’ Strategic Move into XRP ETFs
If approved, the 21Shares Core XRP Trust will be listed on the Cboe BZX Exchange. This listing would allow investors to gain exposure to XRP through a regulated exchange platform, potentially making it easier and more secure for a broader range of investors to access the digital asset.
Approval and listing on Cboe BZX would further expand 21Shares’ lineup of cryptocurrency-focused investment products in the U.S.
The proposed product aims to replicate the performance of the XRP token by relying on the recently launched CME CF Ripple-Dollar Real-Time Index (XRPUSD_RTI). This index provides up-to-the-minute pricing data for XRP against the U.S. dollar, enabling the ETF to track XRP’s real-time market value.
By using this index, the ETF seeks to offer investors accurate exposure to XRP’s performance in a regulated and transparent format, bringing enhanced reliability to crypto asset tracking in traditional markets.
XRP ETF is more Cost-efficient
21Shares has positioned its proposed XRP ETF as a more “cost-efficient way” for investors to gain exposure to XRP than by directly purchasing and holding the token. This approach could reduce certain complexities and costs associated with directly owning cryptocurrency, such as storage and custody.
XRP’s Legal Landscape
In the filing, 21Shares underscores that XRP should not be viewed as a security, a point that aligns with recent developments in the Ripple legal case. Meanwhile, the SEC recently indicated it would not contest the token’s legal classification as part of its appeal in the case involving Ripple, signaling a cautious approach to regulatory challenges surrounding XRP.
Additionally, 21Shares has included several risk factors in its filing for potential investors to consider. These risks include the possibility of an increase in XRP’s circulating supply, which could affect its price; risks of market manipulation; and potential forks within the XRP Ledger (XRPL) that could impact the asset’s stability. Another noted risk is the chance of a “final determination” deeming XRP a security, which could introduce significant regulatory implications.
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Mainstream Acceptance of Cryptocurrency Investment Products
Bitwise, a cryptocurrency index fund manager, was the first to enter the XRP ETF space with a filing on October 1. Following Bitwise, Canary Capital submitted its own XRP ETF proposal, signaling a competitive race among firms seeking to introduce the first XRP-focused ETF to U.S. investors.
While the chances of launching an XRP ETF this year are quite minimal, Ripple CEO, Brad Garlinghouse remains optimistic, asserting that the approval of such a product is ultimately “inevitable.” His confidence reflects a broader belief in the increasing acceptance of cryptocurrency-related investment products in the mainstream financial market.
Earlier this week, the SEC acknowledged Grayscale’s initiative to convert its large-cap fund into an ETF. This significant development highlights the ongoing interest in creating regulated investment vehicles for cryptocurrencies.
Notably, Grayscale’s fund not only includes XRP but also exposes it to several other altcoins, such as Avalanche (AVAX), indicating a diversified approach to cryptocurrency investment. The recognition from the SEC could pave the way for future approvals of similar products, potentially benefiting the entire cryptocurrency market.
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