The Nasdaq Stock Market LLC has filed a proposed rule change with the U.S. Securities and Exchange Commission (SEC) to list and trade shares of the CoinShares XRP ETF under Nasdaq Rule 5711(d), which governs commodity-based trust shares. This development marks a significant step toward expanding regulated investment access to XRP, a leading digital asset designed for fast, low-cost global payments.
The filing, submitted on February 7, 2025, outlines the structural, operational, and compliance framework under which the Exchange intends to support trading of the CoinShares XRP ETF (the “Trust”). The proposal is now open for public comment, as required under Section 19(b)(1) of the Securities Exchange Act of 1934.
Overview of the CoinShares XRP ETF
The CoinShares XRP ETF is structured as a Delaware Statutory Trust established on December 10, 2024. Its primary objective is to provide investors with exposure to the price performance of XRP, minus the Trust’s liabilities and expenses. Each share represents a fractional undivided beneficial interest in the Trust’s holdings—comprising solely XRP and cash.
The Trust operates passively and is not actively managed. It does not engage in futures trading or derivative contracts regulated by the Commodity Exchange Act. As such, it falls outside the regulatory scope of the Commodity Futures Trading Commission (CFTC) as a commodity pool. The sponsor, CoinShares Co., asserts that the Trust is not required to register under the Investment Company Act of 1940.
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Investment Objective and Market Access
The Trust aims to track the Compass Crypto Reference Index XRP—4 p.m. NY Time (the “Index”), an independently calculated benchmark reflecting the U.S. dollar value of XRP at 4:00 p.m. Eastern Time. This index aggregates trading data from major crypto platforms using a volume-weighted median methodology across 12 time partitions, minimizing the impact of outlier trades and reducing manipulation risks.
By offering exposure through an exchange-traded product (ETP), the Trust provides a cost-effective alternative to direct ownership of XRP. Direct investment often involves complex custody solutions, security concerns, and high transaction fees. The ETF structure simplifies access while operating within a transparent, regulated framework.
Understanding XRP and the XRP Ledger
XRP is a digital asset native to the XRP Ledger, a decentralized blockchain launched in 2012. Unlike Bitcoin or Ethereum, which rely on energy-intensive proof-of-work or proof-of-stake mechanisms, the XRP Ledger uses a consensus-based algorithm validated by a network of independent nodes.
This consensus mechanism enables:
- Transaction finality in 3–5 seconds
- Throughput capacity of up to 1,500 transactions per second
- Extremely low fees—typically fractions of a cent
- High energy efficiency due to absence of mining
The network’s design prioritizes transactional utility over store-of-value functions, making it ideal for cross-border payments and real-time settlement systems.
Security and Ownership
Each user controls their XRP via a private-public key pair linked to a wallet address. The private key authorizes transactions and must be safeguarded; loss results in permanent inaccessibility of funds. XRP can be stored in hardware wallets, software wallets, or custodial accounts offered by digital asset platforms.
Notably, all 100 billion XRP were created at launch—none are mined. Of this total, approximately 80 billion were allocated to Ripple Labs, with 55 billion placed in time-locked escrow accounts releasing 1 billion XRP monthly over 55 months. This mechanism enhances market predictability and mitigates supply shock concerns.
Index Methodology and Valuation
The Index serves as the pricing benchmark for the Trust’s net asset value (NAV). It computes a daily reference rate at 4:00 p.m. ET using a robust three-step process:
- Divides the observation window into 12 equal time segments
- Calculates volume-weighted median prices within each segment
- Derives the final value as the arithmetic mean of these medians
This approach resists manipulation by diluting the influence of large or anomalous trades. The Benchmark Administrator, Compass Financial Technologies, oversees index integrity through codified governance policies.
Net Asset Value (NAV) Calculation
The Trust’s NAV is determined daily at 4:00 p.m. ET using the Index price. The formula includes:
- Market value of XRP holdings (based on Index)
- Any other assets
- Minus accrued liabilities and expenses
NAV per share = Total NAV ÷ Outstanding Shares
While valuation occurs at 4:00 p.m., official NAV publication may occur between 5:30 p.m. and 8:00 p.m. ET, allowing time for anomaly detection. If the Sponsor determines the Index fails to reflect fair value, an alternative pricing method may be employed.
Transparency and Real-Time Data
Investors will have access to comprehensive, real-time information:
- Prior day’s NAV per share
- Nasdaq closing price
- Premium/discount analysis
- Quarterly distribution charts
- Daily holdings disclosure
- Prospectus and quantitative data
An Intraday Indicative Value (IIV) is disseminated every 15 seconds during regular trading hours (9:30 a.m.–4:00 p.m. ET), providing a live estimate based on prior NAV adjusted for intraday movements. However, IIV is not real-time NAV—it updates only once daily.
Market data vendors like Bloomberg and Reuters will distribute IIV and quotation information widely.
Secure Custody Framework
The Trust’s XRP is held by a qualified custodian compliant with Rule 206(4)-2 under the Investment Advisers Act. Key safeguards include:
- Segregated accounts identifying the Trust as sole owner
- “Bankruptcy remote” status protecting assets in insolvency
- Fidelity insurance covering theft or loss
- Cold storage for private keys—never connected to networks
- Multi-signature access controls preventing unilateral actions
No individual or group—including Sponsor executives—can access private keys independently. Operational procedures are audited by third-party security experts.
Creation and Redemption Mechanism
Shares are created or redeemed in blocks of 5,000 shares (a Basket) exclusively by Authorized Participants (APs)—registered broker-dealers or financial institutions participating in the Depository Trust Company.
APs transact only in cash:
- Deliver cash to create new Baskets (used to buy XRP)
- Receive cash when redeeming Baskets (XRP sold for cash)
Retail investors cannot redeem directly; they must trade shares on secondary markets. APs do not handle XRP directly nor direct its movement.
Regulatory Compliance and Anti-Manipulation Safeguards
Although there is no U.S.-regulated futures market for XRP, Nasdaq argues that sufficient “other means” exist to prevent fraud and manipulation—consistent with recent SEC approvals for spot Bitcoin and Ether ETFs.
Key factors supporting this claim:
- Fully diluted market cap exceeding $300 billion
- Geographically diverse, 24/7/365 trading activity
- Absence of insider information affecting supply/demand
- Strong arbitrage mechanisms across global platforms
- High fragmentation across exchanges limiting single-point control
Arbitrageurs maintain price equilibrium by capitalizing on temporary discrepancies, making isolated price manipulation ineffective without moving the global market.
Listing Requirements and Trading Rules
The Shares will comply with Nasdaq Rule 5711(d) for initial and continued listing:
- Minimum 40,000 shares outstanding at launch
- Daily NAV calculation and public dissemination
- Trustee must meet capital and operational standards
- Delisting upon Trust termination
Trading hours will span 4:00 a.m. to 8:00 p.m. ET, with rules aligned to equity securities under Rule 10A-3. Market makers must report accounts holding underlying XRP or derivatives and submit records upon request.
Trading Halts and Surveillance
Nasdaq may halt trading due to:
- Disruptions in IIV or Index dissemination
- Non-uniform NAV distribution
- Unusual market conditions threatening fair order
Surveillance includes real-time monitoring for spoofing, marking the close, and cross-market coordination via FINRA under a regulatory services agreement. Communication also occurs through the Intermarket Surveillance Group (ISG) to detect manipulative behavior.
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Frequently Asked Questions (FAQ)
Q: What is the CoinShares XRP ETF?
A: It’s a passively managed exchange-traded fund designed to track the performance of XRP through regulated market infrastructure on Nasdaq.
Q: How does it differ from buying XRP directly?
A: Investors gain exposure without managing private keys or custody solutions, reducing complexity and security risks associated with self-custody.
Q: Is there a risk of price manipulation?
A: The $300+ billion market size, global trading volume, and active arbitrage make manipulation highly impractical compared to traditional assets.
Q: Who can create or redeem shares?
A: Only Authorized Participants—registered financial institutions—can transact in creation/redemption Baskets of 5,000 shares.
Q: How is investor data protected?
A: All submissions to regulators exclude personal information; public comments are published transparently but redacted if necessary.
Q: When will trading begin?
A: Pending SEC approval within 45–90 days after Federal Register publication; no final date has been set.
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Conclusion
The proposed listing of the CoinShares XRP ETF represents a pivotal advancement in bringing institutional-grade, regulated access to one of the most widely used digital assets for global payments. With robust custody, transparent pricing, and strong anti-manipulation safeguards, the product aligns with investor protection principles while meeting growing demand for efficient crypto exposure.
As regulatory clarity evolves, products like this underscore the maturation of digital asset markets within traditional finance ecosystems.
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