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Exclusive: Crypto asset management firm Grayscale is taking the first steps toward launching an XRP exchange-traded fund, FOX Business reports.
The company will announce Thursday morning the launch of the U.S.'s first XRP trust, a so-called “closed-end” fund that offers accredited investors direct exposure to XRP. The crypto token is the native coin that powers the blockchain known as the XRP Ledger, which facilitates cross-border transactions for blockchain payments giant Ripple.
Trusts and ETFs are different investment products. ETFs are sold directly to retail investors and therefore require approval from the Securities and Exchange Commission, while trust structures and marketing to so-called accredited investors have a looser regulatory touch. Still, trusts can become ETFs with the right regulatory approval. Two of Grayscale's single-asset mutual funds (Bitcoin and Ether) evolved into ETFs this year.
ETFs are sold directly to retail investors and must be approved by the Securities and Exchange Commission. (Photo Illustration: Omar Marques/SOPA Images/LightRocket via Getty Images / Getty Images)
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The company plans a four-stage product lifecycle for the XRP Trust, leaving open the possibility of issuing an ETF at some point in the future.
Grayscale is credited with helping bring the first cryptocurrency ETF to Wall Street when it sued the SEC last year seeking permission to convert the Grayscale Bitcoin Trust into a “spot” ETF — an ETF that tracks the daily price of the world's largest cryptocurrency. Grayscale won on appeal, and Wall Street giants including BlackRock, Fidelity and WisdomTree began launching their own bitcoin ETFs one after another. The debut of 11 bitcoin ETFs on Wall Street in January marked a landmark moment for the nascent industry.
Four months later, the SEC approved the launch of six ETFs tracking the underlying price of Ethereum, the world's second-largest cryptocurrency.
The self-proclaimed “XRP Army,” or retail investors who hold the XRP token, have been waiting for asset managers like Grayscale and BlackRock to submit applications for XRP ETFs following the launch of Bitcoin and Ethereum and several recent applications for the Solana ETF. Solana is the fifth-largest cryptocurrency by market cap, while XRP is the seventh.
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Making things even more uncertain for XRP fans, and a potential XRP ETF, is how Wall Street's top brass, the SEC, views the token's regulatory status. The SEC has been embroiled in a long and contentious legal battle with Ripple, suing in 2020 for failing to register its sales of XRP as a security with the commission. Last year, a Manhattan judge handed Ripple a partial victory, ruling that Ripple's sales of XRP to institutional investors could be considered securities transactions, but not when sold to retail investors in the secondary market.
Ripple Labs CEO Brad Garlinghouse attends a panel discussion at the Singapore Fintech Festival in Singapore on November 12, 2018. (Wei Leng Tay/Bloomberg via Getty Images/Getty Images)
The ruling has sparked debate among other judges in courts across the country, while Ripple was ordered to pay a $125 million penalty for those institutional sellers. The SEC has until the first week of October to appeal the secondary market ruling, which is widely expected.
Meanwhile, Grayscale believes XRP itself could have long-term value for investors.
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“We believe the Grayscale XRP Trust will provide investors with exposure to blockchain solutions that have the potential to play a key role in optimizing traditional financial systems by streamlining cross-border payments,” said Reyhaneh Sharif Askari, head of product and research at Grayscale.
XRP is currently trading at $0.54, but hit an all-time high of $3.84 in 2018, before the SEC sued Ripple.
