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Exclusive: Crypto asset manager Grayscale is taking the first step toward launching an XRP exchange-traded fund, FOX Business has learned.
On Thursday morning, the company will announce the launch of the first XRP fund in the United States, a so-called “closed-end” fund that will offer accredited investors direct exposure to XRP. The crypto token is the native currency that powers the blockchain known as the XRP Ledger, which facilitates cross-border transactions for blockchain payments giant Ripple.
A trust and an ETF are two different investment products. An ETF must be approved by the Securities and Exchange Commission because it is marketed directly to retail investors, while a trust has a lighter structure and sales pitch to so-called accredited investors. Still, a trust can become an ETF with the proper regulatory approvals; two of Grayscale’s single-asset investment trusts—bitcoin and ether—became ETFs this year.
An ETF must be approved by the Securities and Exchange Commission because it is marketed directly to retail investors. (Photo illustration by Omar Marques/SOPA Images/LightRocket via Getty Images / Getty Images)
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The company has released a planned four-phase product lifecycle for its XRP trust, leaving open the possibility of an ETF at some point in the future.
Grayscale is credited with helping bring the first crypto ETFs to Wall Street after it sued the SEC last year to allow it to convert its Grayscale Bitcoin fund into a “spot” ETF — an ETF that tracks the daily price of the world’s largest cryptocurrency. Grayscale won the appeal, leading to a flood of Wall Street titans like BlackRock, Fidelity and Wisdom Tree launching their own Bitcoin ETFs. It marked a turning point for the nascent industry when 11 Bitcoin ETFs debuted on Wall Street in January.
Four months later, the SEC approved the launch of six ETFs that track the underlying price of the second-largest cryptocurrency, ethereum.
The self-proclaimed “XRP Army”—retail investors who own the XRP token—have been waiting for an asset manager like Grayscale or BlackRock to file for an XRP ETF following the launch of Bitcoin and Ether products, as well as a handful of recent applications for a Solana ETF. Solana is the No. 5 cryptocurrency by market cap, while XRP ranks No. 7.
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How Wall Street’s top official, the SEC, views the token’s regulatory status has made things even more uncertain for XRP enthusiasts — and for a potential spot XRP ETF. The SEC has been embroiled in a long and contentious legal battle with Ripple, which it sued in 2020 for failing to register XRP sales with the commission as a security. Last year, a Manhattan judge handed Ripple a partial victory when she ruled that Ripple’s sales of XRP to institutional investors could be considered securities transactions, but not when they were sold to retail investors in the secondary market.
Brad Garlinghouse, CEO of Ripple Labs Inc., attends a panel discussion at the Singapore FinTech Festival in Singapore, Nov. 12, 2018. (Wei Leng Tay/Bloomberg via Getty Images / Getty Images)
The decision sparked debate among other judges in courts across the country, while Ripple was ordered to pay a $125 million fine for those institutional sales. The SEC now has until the first week of October to file an appeal of the secondary market decision, which it is expected to do.
In the meantime, Grayscale remains convinced that XRP itself presents potential long-term value for investors.
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“We believe Grayscale XRP Trust provides investors with exposure to a blockchain solution that is potentially positioned to play a critical role in optimizing existing financial systems by streamlining cross-border payments,” said Rayhaneh Sharif-Askary, 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’s lawsuit against Ripple.
