Grayscale Files Application to Convert XRP Trust into Spot ETF, Targeting Regulated XRP Exposure

The New York Stock Exchange (NYSE) Arca has officially filed an application with the U.S. Securities and Exchange Commission (SEC) to convert Grayscale Investments

The New York Stock Exchange (NYSE) Arca has filed an application with the U.S. Securities and Exchange Commission (SEC) to convert Grayscale Investments’ XRP Trust into a spot exchange-traded fund (ETF).

If approved, this conversion would mark the first-ever regulated XRP-based ETF in the U.S., enabling institutional and retail investors to gain exposure to XRP without the complexities of directly purchasing and storing the cryptocurrency.

Grayscale’s XRP Trust, which currently has about $16.2 million in assets, has offered accredited investors a way to gain exposure to XRP through traditional investment accounts. Unlike direct XRP purchases, which require investors to manage their own digital wallets and navigate blockchain-based transactions, the trust allows investors to trade shares that follow XRP’s price.

By seeking SEC approval to convert the XRP Trust into an ETF, Grayscale aims to enhance accessibility and liquidity while reducing premiums and discounts that are often associated with traditional trust structures. ETFs, unlike trusts, offer real-time trading on regulated stock exchanges and typically come with lower costs for investors.

Should the SEC approve the conversion, the introduction of a spot XRP ETF could have significant implications for both XRP and the wider cryptocurrency market. Here's a closer look at the implications:

Bitcoin’s spot ETF approval in January 2024 was a pivotal moment in the crypto industry, enabling mainstream investors to gain exposure to BTC without the technical barriers associated with owning digital assets. Ethereum is also pursuing ETF status, with multiple applications being considered by the SEC.

The key distinction between Bitcoin, Ethereum, and XRP lies in the regulatory perception. While Bitcoin and Ethereum have been largely classified as commodities, XRP’s status has been disputed due to its association with Ripple Labs. The SEC has alleged that Ripple sold unregistered securities, though the case has seen varying rulings in recent years.

Despite the legal challenges, XRP remains one of the most widely traded cryptocurrencies, with a current market capitalization of approximately $178 billion and a price of around $3.10 per token.

Although the prospect of an XRP ETF is promising, several challenges could affect its approval:

If approved, an XRP ETF could have a substantial impact on cryptocurrency markets and the broader financial landscape in the U.S. Here's how it could play out:

The anticipation of an XRP ETF has already sparked discussions among crypto investors and analysts. Historically, ETF approvals have had a positive impact on asset prices. When Bitcoin ETFs were approved, BTC experienced a significant price rise as institutional capital entered the market.

For XRP, a similar pattern could emerge if an ETF gains approval. Increased demand from institutional investors, combined with the credibility of an SEC-regulated investment vehicle, could drive XRP’s price higher. Moreover, mainstream media attention surrounding the ETF could lead to increased retail investor participation, further enhancing liquidity and market capitalization.

Grayscale’s effort to convert its XRP Trust into a spot ETF marks another milestone in the mainstream adoption of cryptocurrencies. This move would not only benefit XRP investors but also set a precedent for other digital assets seeking regulated ETF status.

The SEC’s response will be closely observed, as it will indicate the regulatory direction for altcoins in U.S. financial markets. Whether approved or denied, the application highlights the growing demand for institutional-grade cryptocurrency investment products and the continuous evolution of digital asset markets.

As the regulatory landscape continues to shift, investors and market participants will follow updates on this groundbreaking ETF proposal with great interest.