The Challenges and Opportunities of Launching an XRP Spot ETF in the US
The cryptocurrency world is buzzing with excitement after the launch of the first Bitcoin spot exchange-traded funds (ETFs) in the US, which have attracted billions of dollars in inflows and boosted the price of the leading digital asset. But what about other cryptocurrencies, such as Ethereum and XRP, that also have large market capitalizations and loyal fan bases? Could they also benefit from the ETF craze?
According to Fox Business’s Eleanor Terrett, an XRP spot ETF is not likely to happen anytime soon, unless there is a prior approval of an XRP futures ETF. She explained that the US Securities and Exchange Commission (SEC) had based its decision to greenlight the Bitcoin spot ETFs on the existence and maturity of the CME bitcoin futures market, which provides a reliable source of price discovery and surveillance for fraud and manipulation.
In order to have an $XRP spot ETF, there will first need to be a futures ETF.
— Eleanor Terrett (@EleanorTerrett) January 27, 2024
However, the prospects of an XRP futures ETF are also uncertain, as the SEC has not yet approved any cryptocurrency futures ETFs, despite receiving several applications from various issuers. Moreover, the SEC is currently engaged in a legal battle with Ripple, the company behind XRP, over allegations that XRP is an unregistered security and that Ripple and its executives have engaged in illegal sales of the token.
The outcome of the lawsuit, which is expected to be resolved in 2024, could have a significant impact on the future of XRP and its potential ETFs. If the SEC wins, XRP could face severe restrictions and penalties, which could deter investors and ETF providers from touching the asset. If Ripple wins, XRP could gain more clarity and legitimacy, which could pave the way for more innovation and adoption in the XRP ecosystem.
Meanwhile, Ripple is not sitting idle, as it is reportedly looking for a Senior Manager for Business Development in New York, who would be responsible for driving cryptocurrency-related ETF initiatives with internal trading teams and relevant partners. This suggests that Ripple is still optimistic about the possibility of an XRP ETF and is preparing for it in advance.
As for Ethereum, the second-largest cryptocurrency by market cap, there is also a lot of speculation and anticipation about a possible spot ETF in the US. Unlike XRP, Ethereum does not have any major regulatory hurdles, as the SEC has already stated that it does not consider it a security. However, Ethereum also faces the same challenge as XRP in terms of the lack of a regulated futures market in the US, which the SEC seems to require as a prerequisite for a spot ETF approval.
Therefore, Ethereum and XRP enthusiasts may have to wait a bit longer before they can enjoy the benefits of a spot ETF, such as lower fees, higher liquidity, and easier access. Until then, they can only watch and envy the Bitcoin spot ETF holders, who are enjoying the ride of their lives.
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