New closed-end trust offers accredited investors direct exposure to XRP, coinciding with Ripple's nearing legal resolution with the SEC.
Grayscale, a prominent digital asset management firm, is launching a closed-end XRP trust in the United States. This new investment vehicle is designed to provide accredited investors with direct exposure to Ripple’s XRP token. The launch comes at a significant time, coinciding with the nearing end of Ripple's legal battle with the U.S. Securities and Exchange Commission (SEC).
A closed-end trust is an investment fund with a fixed number of shares that are not redeemable from the fund. Instead, shares are bought and sold on the open market. Grayscale's XRP trust allows accredited investors to gain exposure to XRP without directly purchasing the cryptocurrency. This can be particularly appealing for those who want to invest in digital assets but prefer to avoid the complexities of managing and securing cryptocurrencies themselves.
Unlike an Exchange-Traded Fund (ETF), a closed-end trust faces fewer regulatory constraints. This makes it easier for Grayscale to launch and manage the fund. However, there is potential for the closed-end trust to be converted into an ETF in the future, pending regulatory approval. Grayscale has a track record of successfully converting its Bitcoin and Ethereum trust funds into ETFs, which adds credibility to this possibility.
The launch of the XRP trust is timely as it coincides with the nearing end of Ripple's legal battle with the SEC. The SEC had previously filed a lawsuit against Ripple, alleging that XRP tokens were sold as unregistered securities. In a recent ruling, the court determined that XRP tokens are not securities when sold to retail investors but are considered securities when sold to institutional investors. This ruling has significant implications for the cryptocurrency market and provides some clarity on the regulatory status of XRP.
