Bitwise Files for Spot XRP ETF

Crypto asset manager Bitwise has taken the first steps toward launching an exchange-traded fund (ETF) for XRP, the cryptocurrency used in Ripple Labs’ network.

Earlier today, the firm filed a Form S-1 with the U.S. Securities and Exchange Commission (SEC), officially seeking approval for a Ripple ETF.

Bitwise registered a trust entity in Delaware on Sept. 30. This registration appeared on the Delaware Division of Corporations website and was later confirmed by Bitwise to media outlets.

Creating a trust entity is a preliminary step for firms seeking to list and trade ETF shares. Bitwise, alongside other companies like BlackRock and Fidelity, previously filed trust entities for Bitcoin (BTC) and Ethereum (ETH) before seeking official approval for ETFs.

Specific criteria must be met to secure an ETF approval, including adequate liquidity in a regulated market, network decentralization, resistance to price manipulation, and regulatory clarity for the token.

On Sept. 12, Grayscale, the crypto fund manager, unveiled an XRP trust that could set the stage for a spot XRP exchange-traded fund (ETF) in the U.S. The trust is a closed-end fund designed to give accredited investors direct access to XRP.

In May, Ripple's CEO, Brad Garlinghouse, said an XRP ETF was “inevitable” following the launch of Bitcoin and Ether ETFs in the U.S.

"I think it's just a matter of time, and it's inevitable there's gonna be an XRP ETF, there's gonna be a Solana ETF, there's gonna be a Cardano ETF, and that's great," said Garlinghouse.

If a spot XRP ETF gets the green light, investors would gain a straightforward path to invest in XRP, likely boosting market confidence.

The crypto ETFs approved in the U.S. have already attracted billions in inflows, showing high demand for such products.

According to Farside Investors data, the Bitwise Bitcoin Strategy ETF (BITB) has recorded inflows of $2.1 billion. In total, Bitcoin ETFs report net inflows amounting to $18 billion. Meanwhile, Bitwise's Ethereum fund (ETHW) has attracted $325.8 million in inflows, but overall, Ethereum ETFs have registered net outflows of $572 million since their launch.

At the time of writing, XRP is down 4% in the last 24 hours.

Ripple’s Legal Battle

The move comes after years of legal disputes between Ripple Labs and the SEC. The SEC sued Ripple in 2020, claiming that the company raised $1.3 billion by selling unregistered securities in the form of XRP. The legal battle dragged on for nearly three years, creating uncertainty around XRP and its status.

In July 2023, Ripple scored a partial victory when Judge Analisa Torres ruled that XRP is not a security when sold on public exchanges. However, the ruling left some ambiguity, stating that XRP's institutional sales could still be considered unregistered securities offerings. Despite this, the decision was widely seen as a win for Ripple and the broader crypto industry, though Ripple had to pay a $125 million fine.

In September, both the SEC and Ripple requested a stay on the final judgment.

An Uphill Battle for Altcoin ETFs

Launching an ETF based on a cryptocurrency other than Bitcoin or Ethereum is no small feat.

Nate Geraci, CEO of The ETF Store, noted that Bitwise’s move to file for an XRP ETF is a bet that there will be a friendlier regulatory environment in the U.S. after the November elections.

“Bitwise positioning to file for XRP ETF is highly noteworthy IMO… In the short-term, this is likely a call option on the November election,” he said. “But Bitwise is a highly credible crypto-native fund firm that doesn’t just throw stuff at the wall. That's simply not in their DNA. This is strategic.”

Eric Balchunas, Bloomberg’s senior ETF analyst, expressed doubt over the approval of an XRP ETF, linking it to the political climate. He suggested that the outcome of the upcoming election could significantly impact the decision.

“You’ve heard of the Fed Put. This is like the Trump Call... filings for XRP or Solana or any other altcoins are basically like a cheap call option on a Trump win as [Gensler] will be gone, and anything’s poss[ible]. Harris wins, no way these get approved, and the ‘call’ expires worthless,” he tweeted.