Bitwise, a prominent crypto index fund manager, has filed for a spot exchange-traded fund (ETF) focused on XRP, marking the latest move in the crypto ETF market. This filing could offer investors exposure to XRP, a token central to the ongoing legal battle between Ripple and the U.S. Securities and Exchange Commission (SEC). Although several Bitcoin and Ethereum ETFs have gained approval, no spot XRP ETF has yet been greenlit by the SEC, leaving this new filing open to potential regulatory challenges.
Bitwise’s Spot XRP ETF Filing
On Monday, Bitwise officially submitted a registration for an XRP-focused ETF with Delaware’s Department of State’s Division of Corporations. The filing names CSC Delaware Trust Company as the registered agent. The registration signals Bitwise’s intent to establish a trust entity, which could offer XRP investment opportunities to a broader range of investors.
Bitwise’s Chief Investment Officer, Matthew Hougan, confirmed the filing, stating, “We can confirm this is a registration by us. It is a registration of a trust entity in Delaware. We can share more details and comments tomorrow.” The upcoming days will likely reveal more about Bitwise’s strategic direction and how it plans to address the challenges associated with a spot XRP ETF.
Regulatory Hurdles
The SEC has never approved a spot XRP ETF, and any attempt to launch such a product will likely face significant obstacles. The legal battle between the SEC and Ripple, the company behind XRP, is a central issue. The SEC has accused Ripple of raising $1.3 billion through the sale of XRP, which it considers an unregistered security. Ripple has countered, asserting that XRP should be classified as a currency, not a security.
The SEC’s cautious stance toward approving a spot XRP ETF aligns with its overall approach to crypto regulation. The agency has scrutinized several crypto products over concerns about market manipulation, investor protection, and custody issues. However, recent approvals of Bitcoin and Ethereum ETFs suggest that regulatory bodies may be more willing to consider other digital asset-based ETFs in the near future.
Grayscale’s XRP Fund Plans
In parallel to Bitwise’s ETF filing, Grayscale, another major player in the crypto space, has announced plans to launch a closed-end XRP fund for accredited investors. Closed-end funds differ from ETFs in that they typically have a fixed number of shares and trade on the open market like stocks. These funds are often more accessible to institutional and high-net-worth investors.
Grayscale’s entry into the XRP market further highlights the growing interest in XRP despite its legal uncertainties. Grayscale already manages various crypto funds, including Bitcoin and Ethereum, and its move to create an XRP-specific fund underscores the token’s enduring appeal within the crypto community.
ETPs vs. ETFs
When discussing crypto-based financial products, it’s important to note the difference between exchange-traded products (ETPs) and exchange-traded funds (ETFs). Although often used interchangeably, the SEC views these terms differently. In a recent statement, Natasha Vij Greiner, director of the SEC’s Division of Investment Management, clarified that products like spot Bitcoin ETFs should technically be referred to as ETPs, as they are not covered under the Investment Company Act of 1940, also known as the ’40 Act.
“They’re actually not under the ’40 Act. They’re not a ’40 Act product, and so there are not the same protections and some of the same considerations related to custody that we’re grappling with,” Greiner explained at a conference in September. This distinction is crucial because it underscores the unique regulatory challenges crypto products face compared to traditional financial instruments.
The Road Ahead for XRP ETFs
With no precedent for a spot XRP ETF, Bitwise’s filing will likely attract scrutiny from both investors and regulators. The SEC’s legal battle with Ripple complicates the approval process, as it remains uncertain how the courts will ultimately classify XRP. Until that issue is resolved, any financial products tied to XRP, like ETFs, will remain on shaky ground.
Nonetheless, the broader trend in the crypto market suggests that regulatory approval for more digital asset-based ETFs is possible. The recent approvals of Bitcoin and Ethereum ETFs signal that the SEC may eventually expand its oversight to include other cryptocurrencies, depending on how the legal and regulatory landscape evolves.
Bitwise’s move to file for a spot XRP ETF represents a bold step in the evolving world of crypto finance. While the SEC has yet to approve such a product, and significant legal challenges lie ahead, the interest from major players like Bitwise and Grayscale indicates strong demand for XRP investment opportunities. As the regulatory environment shifts and the legal status of XRP becomes clearer, the possibility of a spot XRP ETF may eventually become a reality.
