- The recent court ruling provides more clarity on XRP’s legal status.
- The improved regulatory landscape could make XRP a candidate for a spot ETF, though challenges remain.
XRP in the Spotlight: Spot ETF in Sight?
The cryptocurrency XRP, developed and issued by the payment company Ripple, could be the next digital asset to be offered through a spot exchange-traded fund (ETF), according to financial analyst Mandela Amoussou. This optimistic forecast is based on the improved regulatory clarity surrounding XRP following the recent court ruling.
The Ruling and its Impact
The US court imposed a $125 million fine on Ripple and prohibited the company from further violating securities laws. This ruling concluded a four-year legal battle between the Securities and Exchange Commission (SEC) and Ripple. Although the ruling was against Ripple, it now provides the company with clear guidelines for handling XRP. Crucially, the court did not classify XRP itself as a security.
Regulatory Classification as a Key Criterion
The regulatory classification of a digital asset as a commodity or a security is a crucial factor for the potential launch of a spot ETF. The unclear regulatory situation of XRP has been a major obstacle for its institutional adoption. With the recent regulatory decision favoring the cryptocurrency,
“XRP is a candidate for a future spot ETF,”
explains the analyst.
Cautious Optimism and Market Interest
Amoussou, however, notes that he is
“cautiously optimistic”
about such a possibility, as
“no issuer has yet shown interest in applying for an XRP ETF.”
Mathew Sigel, Head of Digital Asset Research at VanEck, a company with Ether and Bitcoin-based funds, also considers it
“unlikely”
to issue an XRP-based ETF. Sigel explained that the issuer must be convinced that the asset is a good investment and must consider who its creators are, which exchanges it is present on, and which custodians support this asset.
“We notice that there is a lack of conviction and demand among customers,”
he added.
In contrast, Brad Garlinghouse, CEO of Ripple, stated that there will soon be an ETF for XRP, as well as for other cryptocurrencies such as Solana (SOL) and Cardano (ADA).
Challenges and Future Outlook
Amoussou adds that XRP’s lengthy legal process and the uncertainty about its regulatory status may have contributed to “muted” demand for the digital asset among traditional investors. Furthermore, XRP on-chain data does not reflect widespread enthusiasm, at least for now. Various data on the Ripple network, called “XRP Ledger,” suggest some skepticism or apathy towards the project.
If the SEC does not appeal (it has 60 days to do so) and the legal dispute between Ripple and the regulator is definitively concluded, a long and complex process will end, which will have significant implications for the company and, of course, for the cryptocurrency. In addition, precise clarity is expected on the use of XRP in Ripple‘s On-Demand Liquidity (ODL) service, Amoussou notes.
Ripple’s Strategies and the Role of XRP
In early April, Ripple stopped using XRP for ODL transactions from the US as part of regulatory compliance. Ripple replaced XRP with the Tether (USDT) stablecoin as the ODL bridge coin. This was a setback for one of the main use cases for XRP in the Ripple ecosystem. In response, Ripple announced that it would launch a stablecoin later this year.
Ripple USD (RLUSD) will be launched on both the XRP Ledger and Ethereum, and initial testing has already begun. The new stablecoin could replace the current use of USDT for ODL settlements in the US.
With the introduction of the stablecoin, the importance of XRP in the Ripple ecosystem could decline, especially for US-based settlements, Amoussou said.
The analyst also considers Ripple’s expansion into other areas besides the stablecoin. In this sense, he points out that the tokenization of real-world assets (RWA) offers “new opportunities” for Ripple. Earlier this month, the company announced that it would partner with OpenEden, a platform that connects traditional finance with the world of decentralized finance (DeFi), to tokenize $10,000 worth of US Treasury bonds.
“In my opinion, its prospects as a possible reference platform for asset tokenization remain,”
the analyst added.
The recent court ruling has undoubtedly improved the regulatory landscape for XRP, opening up the possibility of a spot ETF in the future. However, challenges such as market demand and Ripple’s own strategic decisions, like the introduction of a stablecoin, could influence XRP‘s long-term trajectory. Investors and enthusiasts will be closely watching how these developments unfold and their impact on XRP’s role and value within the broader cryptocurrency ecosystem.