Another XRP ETF Delay: SEC’s Duty or Damage to Crypto Trust?

WASHINGTON – The U.S. Securities and Exchange Commission (SEC) on Thursday once again postponed its decision on a proposed spot XRP exchange-traded fund (ETF), extending the review period by another 60 days. The move, which the agency attributed to the need for a thorough review of investor protection measures, has reignited a fierce debate over whether the SEC’s cautious approach is shielding the public or stifling innovation and eroding market confidence.

This latest XRP ETF delay comes after the successful launch of Bitcoin and Ethereum ETFs, fueling frustration among investors and asset managers who see the regulatory process for other digital assets as opaque and unpredictable.

Key Takeaways

• Decision Postponed: The U.S. Securities and Exchange Commission (SEC) has once again extended the review period for a proposed spot XRP exchange-traded fund (ETF), pushing a final decision back by at least 60 days.
• SEC’s Rationale: The agency cited the need for more time to thoroughly consider complex issues related to the product’s structure, market stability, and measures to protect investors from fraud and manipulation.
• Industry Frustration: The XRP ETF delay has drawn sharp criticism from the digital asset industry, with proponents arguing the SEC is applying an inconsistent standard and creating regulatory uncertainty that damages crypto investor confidence.
• Legal Shadow: The ongoing legal ambiguity surrounding XRP’s status remains a key sticking point. Despite a landmark court ruling in favor of Ripple, the SEC’s continued appeals leave a cloud over the asset that complicates the ETF approval process.

The Rationale: Investor Protection in a Volatile Market

In its filing, the U.S. Securities and Exchange Commission (SEC) stated that a longer period was necessary to evaluate the proposed rule change that would allow the ETF to be listed. The agency’s primary mandate is investor protection, and it has consistently expressed concerns about the crypto market’s susceptibility to fraud and manipulation.

For XRP specifically, regulators are believed to be focused on several key issues: the depth and reliability of the asset’s trading markets, the security of custody solutions, and the persistent legal questions surrounding its classification.

“From the SEC’s perspective, caution is the default setting, especially with an asset that has been the subject of a major enforcement action,” a former SEC counsel told Reuters. “The agency’s job is not to legitimize every asset with a following, but to ensure the markets are safe for retail investors.”

The Backlash: Cries of Unfair Treatment and Lost Confidence

The crypto industry’s reaction to the XRP ETF was swift and critical. Proponents argue that the asset has more legal clarity than most tokens, following the 2023 court ruling that deemed XRP non-security when sold on public exchanges. They perceive the ongoing delays as evidence of a biased and inconsistent regulatory approach.

The market registered its disappointment, with the price of XRP dipping roughly 4% in the hours following the announcement. Asset managers like Grayscale and VanEck, which are rumored to be among the filers, have argued that bringing products like a spot XRP ETF into the regulated public market is the best way to protect investors, offering transparency and liquidity that is often absent in direct crypto trading.

A spokesperson for a digital asset advocacy group expressed concern about the regulatory delays, stating that they create an uneven playing field. This lack of regulation erodes investor confidence in cryptocurrencies and encourages innovation to other, less-regulated jurisdictions.

XRP’s Unique Shadow: The Ripple Effect

The central issue complicating the XRP ETF is its unique and contentious history. The SEC’s multi-year lawsuit against Ripple Labs, the company most closely associated with the token, has significantly impacted the situation.

While a federal judge delivered a landmark decision in July 2023, creating a distinction between institutional and public sales of XRP, the SEC is appealing key aspects of the ruling. This ongoing legal battle, covered extensively by financial media like Bloomberg Crypto, means that the XRP legal status is not fully settled in the eyes of the regulator, making it a much higher hurdle for an ETF product than Bitcoin, which is universally considered a commodity.

The latest XRP ETF delay is a clear signal that the SEC’s journey into crypto regulation will be slow and methodical. While the agency holds firm on its investor protection mandate, the crypto industry is growing increasingly frustrated by what it sees as a regulatory bottleneck, leaving billions in potential investment hanging in the balance.

Also read,RIC-Style Crypto ETFs Explained—XRP and Memecoins Next?.

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