SEC Acknowledges NYSE Arca's XRP ETF Proposal: A Step Towards Federal Review

The U.S. Securities and Exchange Commission (SEC) has acknowledged and published details of NYSE Arca's proposal to list shares of the Grayscale XRP Trust, marking a significant step towards a potential federal review of the cryptocurrency-based exchange-traded fund (ETF). The regulator's acknowledgment of the 19b-4 filing sets the stage for a 240-day review window, following an initial 45-day period after the proposal is published in the Federal Register.

The SEC's acknowledgment comes amidst growing interest in crypto ETFs, with several competing firms submitting proposals for XRP ETFs. If approved, the Grayscale XRP Trust ETF would represent a significant validation of XRP as an investable asset, potentially broadening institutional participation and enhancing market liquidity, according to Min Jung, an analyst at Presto Research.

Grayscale's 19b-4 filing outlines the conversion process of the $16.1 million trust into an exchange-traded product. Coinbase Custody Trust Company will serve as custodian, while BNY Mellon will handle administrative duties. However, the proposal faces unique challenges due to the ongoing regulatory uncertainty surrounding the underlying asset, XRP.

If the SEC gives Grayscale's XRP push a green light, it could signal a more constructive stance toward crypto-based investment products. The 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.

The proposal addresses key regulatory concerns by implementing a creation and redemption process where authorized participants deal exclusively in cash rather than directly handling XRP. This 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.