The SEC has acknowledged and published details of NYSE Arca’s proposal to list shares of the Grayscale XRP Trust on Thursday, revealing an extensive framework designed to address regulatory concerns around trading.
While the regulator has acknowledged the 19b-4 filing, it’s only one step along what could stretch to a 240-day review window after an initial 45 days, which only begins once the proposal is published in the Federal Register.
This acknowledgment comes as heightened interest in crypto ETFs, which has led several competing firms to file for XRP ETFs of their own.
“If approved, it would represent a significant validation of XRP as an investable asset, potentially broadening institutional participation and enhancing market liquidity,” Min Jung, an analyst at Presto Research, told Decrypt.
Grayscale’s 19b-4 filing outlines how the $16.1 million trust would get “converted” and operate as an exchange-traded product, with Coinbase Custody Trust Company serving as custodian and BNY Mellon handling administrative duties.
However, unlike previous crypto trust conversions, Grayscale’s XRP proposal faces unique challenges, given the ongoing regulatory uncertainty surrounding the underlying asset.
If the SEC gives Grayscale’s XRP push a shove forward, this could “signal a more constructive stance toward crypto-based investment products,” Jung noted.
Grayscale was one of the first companies to push for an XRP ETF, though this one is going to come in as a conversion if approved.
Its Grayscale XRP Trust is designed to track XRP’s price through the CoinDesk XRP Price Index (XRX), calculated at 4:00 p.m. New York time each business day.
To mitigate manipulation risks, the trust will source XRP prices from “U.S.-Compliant Trading Platforms” that meet strict regulatory standards, including anti-money laundering and know-your-customer requirements.
As of September 2024, these platforms handle over 97% of U.S. dollar-XRP trading volume, the filing claims.
“The Index is designed to limit exposure to trading or price distortion of any individual Digital Asset Trading Platform that experiences periods of unusual activity,” the filing explains, detailing multiple safeguards against market manipulation.
This proposal also addresses key regulatory concerns around digital assets.
By implementing a creation and redemption process where authorized participants deal exclusively in cash rather than directly handling XRP, the fund is attempting to provide a regulated path for institutional investors while maintaining a certain degree of operation security.
The trust’s framework also includes provisions for handling potential blockchain forks and maintaining accurate price discovery across multiple trading venues.
The regulator is seeking public comments on the filing while it evaluates this latest attempt to expand institutional access to the world’s third-largest crypto.
Edited by Sebastian Sinclair
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