No Exchange Needed! Ripple Introduces XRP Depository Receipts for Investors
More from the Author Cal Evans
Ripple is launching XRP Depository Receipts (DRs) for accredited investors, allowing them to gain exposure to XRP without directly purchasing it on exchanges, with custody handled by Anchorage, a federally regulated bank.
This move comes as the SEC reviews XRP ETF applications, and Ripple remains optimistic despite regulatory scrutiny, citing a key court ruling that XRP is not a security when sold on secondary markets.
Ripple is making waves in the crypto industry with its latest initiative—introducing XRP Depository Receipts (DRs) for accredited investors. This innovative approach will allow investors to gain exposure to XRP without directly purchasing it on cryptocurrency exchanges.
A Bridge Between Traditional Finance and Crypto
The XRP DRs will be backed by real XRP held in custody at Anchorage, a federally regulated bank overseen by the US Office of the Comptroller of the Currency (OCC). This setup ensures security and compliance while offering institutional investors a regulated way to invest in XRP.
Financial journalist Eleanor Terrett explained on X (formerly Twitter) that these DRs enable investors to benefit from XRP’s price movements without having to manage the asset directly. Essentially, it serves as a bridge between traditional finance (TradFi) and decentralized finance (DeFi), making it easier for institutional money to flow into the XRP ecosystem.
SEC Scrutiny and Regulatory Hurdles
Ripple’s move comes at a crucial time as the U.S. Securities and Exchange Commission (SEC) is reviewing applications for XRP exchange-traded funds (ETFs). The SEC has up to 240 days to approve or reject these applications, with a final decision expected by October 4.
To launch XRP DRs, Ripple must comply with strict regulatory requirements, including filing Form S-1 registration statements with the SEC. These filings must detail the custody of XRP at Anchorage, market surveillance measures, and risk disclosures. The SEC will closely examine whether XRP DRs qualify as securities under the Howey Test, which assesses whether an asset represents an investment contract.
Ripple’s Confidence Amid Regulatory Uncertainty
Despite regulatory uncertainty, Ripple remains optimistic. The company’s confidence is bolstered by a key court ruling in July 2023, where Judge Analisa Torres ruled that XRP is not a security when sold on secondary markets. However, Ripple’s direct institutional sales were deemed securities violations, meaning the company still faces scrutiny from regulators.
Additionally, the recent filing of 19b-4 forms by the Chicago Board Options Exchange (CBOE) for ETF issuers like Bitwise and WisdomTree has set the clock ticking on the SEC’s decision-making process. The current SEC split (3-2) includes members who are pro-crypto, further fueling optimism within the industry.
The Future of XRP Depository Receipts
Ripple’s introduction of XRP DRs could pave the way for wider institutional adoption. If the SEC gives the green light, these receipts could become a significant financial instrument, allowing accredited investors to participate in the crypto market without directly handling digital assets.
As the regulatory landscape evolves, all eyes will be on Ripple and the SEC’s decision. If successful, this initiative could set a precedent for similar financial products in the crypto industry, further bridging the gap between traditional finance and digital assets.
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