SEC Accepts Grayscale’s XRP ETF Proposal, Preparing for Federal Review

• SEC recognizes NYSE Arca proposal.
• Possible expansion of market liquidity.
• Conversion of crypto fund into traded product.

The U.S. Securities and Exchange Commission (SEC) has taken a significant step forward by recognizing NYSE Arca’s proposal to list shares of the Grayscale XRP Trust. Published last Thursday, the document details a carefully crafted framework to mitigate regulatory concerns surrounding the trading of such assets.

At the time of publication, the price of XRP was quoted at US$2,56, up 3,5% in the last 24 hours.

O record 19b-4 , now recognized by the SEC, begins a 240-day countdown to federal review, following an initial 45-day period that begins with publication of the proposal in the Federal Register. This milestone is crucial in the advancement of cryptocurrency ETFs, especially for XRP, which is seeing a growing number of applications from various institutions.

The document describes the proposed listing and trading of shares of the Grayscale XRP Trust under NYSE Arca Rule 8.201-E, which focuses on “Commodity-Based Trust Shares”. The fund invests in XRP and is one of the largest in the world in terms of asset management, with approximately $16,1 million in assets under management as of the date of the document. The proposed shares offer US investors exposure to XRP without the need to directly purchase the asset, with the intention of facilitating investment in XRP on a regulated exchange.

The fund’s managers include Grayscale Investments and Digital Currency Group, with Coinbase Custody Trust Company, LLC acting as custodian. The fund’s investment objective is for the value of shares to reflect the value of XRP held by the fund, less expenses and other liabilities. The fund’s operations are limited to issuing and redeeming baskets of shares in exchange for XRP and managing expenses through the fund’s assets.

The fund uses the CoinDesk XRP Price Index to calculate its NAV, which is the total value of the fund divided by the number of shares outstanding, and is adjusted to reflect accrued and unpaid expenses. The XRP operations within the fund are detailed, including how incidental rights and IR virtual currencies are managed, although the fund currently chooses to irrevocably abandon such rights and currencies.

The document also details the technical and operational aspects of the XRP network, emphasizing its function as a real-time payment and settlement system that enables secure and fast transactions between currencies, with XRP acting as a bridge token to facilitate liquidity between two currencies in a transaction.

However, XRP’s situation is unique due to the regulatory uncertainty that still surrounds the asset. Still, a potential green light from the SEC for Grayscale’s proposal could, according to Min Jung, “signal a more constructive stance towards cryptocurrency-based investment products.”

Grayscale stands out for being among the first to seek the conversion of a cryptotrust into an XRP ETF, showing a promising path for the consolidation of this type of product in the market.