Asset Managers Explore Regulatory Safeguards as Cboe Seeks Approval for Spot XRP ETFs

• Major asset managers are ramping up efforts to launch spot XRP ETFs, signaling a pivotal moment in the evolving landscape of cryptocurrency regulation.

• With recent applications submitted to the SEC, firms are attempting to navigate the complexities surrounding XRP’s regulatory status while addressing market demands.

• Cboe claims to be applying proper legal standards, aiming to classify XRP not as a security under federal law, as detailed in their recent filings.

Asset managers pursue spot XRP ETFs amid regulatory challenges, leveraging SEC case rulings while addressing market and compliance concerns.

Asset Managers Push for XRP ETFs: A New Regulatory Landscape

The cryptocurrency market is witnessing increasing activity as major asset managers like WisdomTree, Bitwise, 21Shares, and Canary line up to launch the first spot XRP ETFs in the U.S. This development arises after Bitcoin and Ethereum successfully broke into the ETF market last year. Despite XRP’s 25% decline over the past weeks, asset managers are betting on its recovery and the growing interest in crypto investment vehicles.

Challenges in Gaining Regulatory Approval

Unlike Bitcoin and Ethereum, which have well-established futures markets, XRP faces significant regulatory hurdles. Cboe’s filings represent a critical attempt to fortify XRP’s position as an ETF candidate while addressing the SEC’s regulatory uncertainties. The company cites the July 2023 ruling in the SEC v. Ripple Labs case, where XRP sales were partially classified as not being securities. This ruling is central to legitimizing the ETF efforts, with asset managers focusing on compliance frameworks designed to appease regulators.

Innovative Safeguards Proposed by Asset Managers

In a bid to enhance their chances of receiving SEC approval, asset managers are implementing strict safeguards. One notable strategy involves sourcing XRP from secondary markets rather than directly from Ripple Labs. This decision aims to distance the ETF from Ripple Labs’ legacy and the associated regulatory scrutiny. Moreover, applications include measures such as advanced surveillance systems, third-party custody arrangements, and cold storage of XRP to further ensure market integrity.

The Future of XRP ETFs: Possibilities and Limitations

The new filings are part of a broader strategy to pave the way for XRP ETFs amid an ongoing SEC appeal of the Ripple decision. The SEC has 45 days to review these applications and can extend this to 90 days if necessary. The outcome will be crucial not just for XRP but for the broader ETF landscape as regulators continue to revise their approaches to digital assets.

Conclusion

As major asset managers advance their applications to launch spot XRP ETFs amidst shifting regulatory paradigms, the coming months will reveal whether these proposals will meet the SEC’s scrutiny. The implications are significant, potentially setting a precedent for other cryptocurrencies seeking ETF status. This situation demands close observation from investors and market participants alike.