An XRP ETF has the potential to change the regulatory and investment landscape of crypto. This statement could be true.
XRP, which is in the process of applying for an ETF, with all the problems it faces, will change the way of thinking about crypto regulations and investments.
Understanding XRP ETFs
Before reviewing how an XRP ETF has the potential to change the regulatory and investment landscape of crypto, let's first understand what an XRP ETF is.
ETF XRP is a financial instrument that allows investors to purchase shares in funds that hold XRP directly.
The product provides access to the value of XRP without requiring direct ownership of the crypto asset.
Such a structure is designed to appeal to institutional investors, offering a way to invest in digital assets that is regulated and relatively stable compared to the volatility of the live crypto market.
XRP ETF Application Process
On October 2, 2024, Bitwise Asset Management made a big move by proposing an XRP exchange-traded product (ETP) to the US Securities and Exchange Commission (SEC).
The submission is made using Form S-1, which is a standard document for registration of new securities.
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Not only Bitwise, other companies like WisdomTree, 21Shares, And Canary Capital also follows a similar path, indicating increasing interest among institutional investors in XRP as an attractive investment tool.
Challenges in the XRP ETF Application Process
However, the journey to apply for an XRP ETF did not go smoothly, because the regulatory environment is complex.
The problems that arise are increasingly complicated due to the ongoing legal dispute between Ripple Labs and SEC.
The dispute stems from the question of whether XRP should be considered a security.
Then in July 2023, the court ruled that XRP is not a security when traded on a public exchange, but is considered a security when sold directly to institutional investors.
The ruling paves the way for potentially major changes, however SEC has already expressed its intention to appeal, adding to the existing uncertainty.
With the appeal filed by the SEC, the approval schedule for the XRP ETF application is increasingly uncertain.
The SEC was given until 240 days to provide a response to the application, which means this decision could take until the middle of 2025.
This situation, coupled with unresolved legal issues, means that a final decision regarding the approval of an XRP ETF is far from clear.
Implications of XRP ETF Acceptance
The approval of an XRP ETF could bring major changes to the crypto asset ecosystem.
One of the main impacts is the potential for increased participation by institutional investors.
In contrast to individuals who typically purchase crypto assets directly through exchanges, institutional investors tend to look for more regulated and supervised products, such as ETFs.
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With the XRP ETF, they will have a safer and more regulated investment path.
The presence of institutional investors not only increases transaction volume, but also contributes to increasing liquidity and stability of the XRP market, which has often experienced high volatility.
Waves of Change in Crypto Investment Market Dynamics
Additionally, the approval of an XRP ETF could change the dynamics of the overall investment market.
As a financial product that integrates crypto assets into traditional investment structures, this ETF could be an entry point for wider acceptance of crypto assets in mainstream portfolios.
The move has the potential to inspire the development of similar products in other digital asset sectors, creating a domino effect that accelerates the legitimacy of cryptocurrencies in the world of finance.
However, this impact is not only felt by XRP. The approval of an XRP ETF will also be a barometer for other crypto ETF proposals that are still awaiting regulatory decisions.
If successful, this could pave the way for the growth of more crypto-based ETFs, thereby cementing digital assets' position in the global investment landscape.
In other words, the approval of an XRP ETF is not just about the benefits for a single asset, but also about the potential for a major transformation in the way the world views and uses crypto assets as an investment tool.
Final Notes
The launch of the XRP ETF is currently facing various regulatory challenges and uncertainty, especially due to the ongoing legal dispute between Ripple Labs and the SEC.
Although interest from institutional investors is quite high, and several companies have applied for permits, success still depends on regulatory progress and resolution regarding XRP's status as a security.
If these hurdles are overcome, an XRP ETF has the potential to drive increased institutional participation in the crypto asset market.