Bitwise Files for XRP ETF Despite Ongoing SEC Legal Battles

In a significant development in the cryptocurrency market, Bitwise Asset Management has filed for an exchange-traded fund (ETF) based on XRP, the digital currency associated with Ripple Labs. The filing was registered with the State of Delaware, raising hopes for institutional investment in this controversial cryptocurrency. However, the path to approval is fraught with uncertainty due to ongoing legal disputes between Ripple and the U.S. Securities and Exchange Commission (SEC).

Details of the Filing

Bitwise’s application for the XRP ETF appeared on the Delaware Division of Corporations website on September 30, 2024. According to a Bitwise spokesperson, “This is a registration by us,” confirming the legitimacy of the filing. The registered agent for the ETF is CSC Delaware Trust Company, based in Wilmington, Delaware.

Despite the filing, experts caution that it does not guarantee an immediate application for registration with the SEC. This step may merely represent preliminary preparations, and it could take months before any formal filing is made. As a Bitwise representative remarked, they would not comment on “a fund that is in the filing stage.”

XRP’s Journey Through Legal Challenges

The application for the XRP ETF comes on the heels of a tumultuous legal history between Ripple and the SEC. In December 2020, the SEC initiated a lawsuit against Ripple, alleging that its sale of XRP constituted an unregistered securities offering, a claim Ripple has vigorously contested. In July 2023, Ripple secured a partial victory when Judge Analisa Torres ruled that XRP is not a security when sold on public exchanges. However, institutional sales were ruled as potentially qualifying as securities offerings.

In recent developments, both Ripple and the SEC have requested a stay on the final judgment in their case, signalling that the legal battle is far from over. The latest filing from Bitwise comes as many in the crypto community remain hopeful about the future of XRP as a regulated investment vehicle.

Impact on the Crypto Market

The potential approval of an XRP ETF could significantly impact the cryptocurrency landscape. Currently, several Bitcoin and Ethereum ETFs have gained SEC approval, attracting billions in investment. A successful XRP ETF could similarly provide institutional investors with a regulated avenue to gain exposure to the digital asset.

Ripple CEO Brad Garlinghouse previously stated that an XRP ETF is “inevitable,” particularly following the recent approvals for other crypto-based ETFs. He believes that the market is moving toward greater acceptance of cryptocurrency investments, especially with the backdrop of established assets like Bitcoin and Ether gaining traction.

Comparisons to Other Crypto Products

While the filing is a positive step for Bitwise, it is worth noting that a spot XRP ETF has yet to receive SEC approval. The agency’s history of legal battles with Ripple raises questions about the likelihood of approval in the near future. Furthermore, Grayscale has announced plans to launch an XRP “closed-end” fund targeting accredited investors, indicating that the market is still exploring various avenues for investment in XRP.

SEC Terminology Clarification

In a recent statement, an SEC official clarified the terminology surrounding exchange-traded products (ETPs). Natasha Vij Greiner, Director of the SEC’s Division of Investment Management, noted that the term “exchange-traded fund” is often misused, emphasizing that not all products currently trading fall under the Investment Company Act of 1940.

Conclusion

Bitwise’s filing for an XRP ETF marks a pivotal moment in the ongoing evolution of cryptocurrency investment vehicles. As the SEC’s legal challenges with Ripple continue, the fate of the ETF remains uncertain. However, should it be approved, it could pave the way for greater institutional involvement in the cryptocurrency market, significantly enhancing liquidity and adoption.