The launch of the first XRP exchange-traded fund (ETF) in the United States has ignited significant discussion within the crypto community. The REX Osprey XRP ETF, a new investment vehicle, aims to make it easier for a broader range of investors to gain exposure to XRP. However, a closer look at its structure reveals that it may not be the “pure” spot XRP ETF many had been hoping for.

The Regulatory Route: A Different Approach

Typically, a spot crypto ETF that holds an asset directly, like XRP, would file under the Securities Act of 1933. The REX Osprey XRP ETF, however, took a different path. It was filed under the Investment Company Act of 1940, a regulatory framework often used for futures-based ETFs. This unique approach allowed the fund to launch automatically after 75 days without a formal objection from the SEC.

How the REX Osprey XRP ETF Is Structured

According to an analysis, this fund is structured as a “Frankenstein of a fund” to navigate regulatory hurdles. Its composition is a mix of different asset types:

• Direct XRP Holdings: At least 80% of the ETF’s assets will be directly invested in actual XRP tokens. This provides a significant level of direct exposure to the cryptocurrency.
• Offshore Subsidiary for Derivatives: Up to 25% of the assets will be managed through an offshore subsidiary located in the Cayman Islands. This is done to handle derivatives and other assets that the fund cannot hold directly under U.S. regulations.
• Cash and Other Investments: The remaining 5% of the fund will be held in cash, U.S. treasuries, or other related crypto investments, such as Bitcoin or Ethereum ETFs.

A Step Forward, But Not the Final Destination

While the REX Osprey XRP ETF is a notable milestone for the XRP community, it is considered a “light” version of a spot ETF. It represents a positive step towards greater adoption and legitimacy for XRP, but it is not the traditional 100% spot ETF that many enthusiasts are waiting for. The community is now looking forward to the potential approval of a “true” spot XRP ETF that has been filed under the traditional 1933 act.

The conversation around the REX Osprey XRP ETF highlights the ongoing evolution of the crypto investment landscape and the various ways funds are being structured to meet regulatory requirements while still providing investors with access to digital assets.