Crypto Quill

Ripple’s legal woes may be behind it, but the road to recovery is just beginning. In a notable move, WisdomTree has launched its latest crypto exchange-traded product (ETP) offering direct exposure to XRP, the native cryptocurrency of the Ripple network. With the legal cloud surrounding Ripple now lifting, this new product provides an easy, regulated way for investors to engage with XRP without the complexities of managing crypto wallets or private keys.

Ripple’s Legal Battle Comes to a Close

For nearly four years, Ripple’s future hung in the balance due to a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) in December 2020. The SEC alleged that Ripple Labs, the company behind XRP, unlawfully sold the token to retail investors, arguing that XRP should be classified as a security. This caused a major ripple effect in the crypto market, leaving many unsure about the future of XRP and its role in the broader financial ecosystem.

However, after years of legal challenges, Ripple emerged victorious in a partial ruling in July 2023. A federal judge determined that XRP, when traded on public exchanges, is not a security—a significant win for the company. In August 2024, Ripple agreed to pay a $125 million penalty for improper token sales, but the SEC dropped all remaining claims against the company’s executives in October. This resolution has cleared the way for Ripple to rebuild trust and strengthen its position in the crypto space.

XRP’s Role in the Financial Ecosystem

Ripple was originally conceived as a solution to streamline global financial transactions, offering an alternative to the aging SWIFT network. Launched in 2012, Ripple’s system facilitates real-time, low-cost, and energy-efficient transactions, with settlements happening in just 3-5 seconds. The network operates using a decentralized blockchain that employs a unique Proof-of-Association (PoA) consensus mechanism, allowing for rapid transaction validation while minimizing energy consumption.

XRP serves as a bridge currency, allowing the seamless exchange of fiat currencies and digital assets without the need for intermediaries. Its utility extends beyond the speculative crypto market, making it an attractive option for financial institutions looking for faster, cheaper alternatives to traditional money transfers.

Despite its practical uses, XRP’s path to widespread adoption has been anything but smooth, with the ongoing legal uncertainty creating significant headwinds for Ripple. But with the SEC lawsuit behind it, Ripple is now poised to regain its momentum, and the launch of WisdomTree’s XRP ETP could help fuel this recovery.

WisdomTree’s XRP ETP: A New Investment Vehicle

WisdomTree’s new Physical XRP ETP (WXRP) offers a straightforward way for European investors to gain exposure to XRP. The ETP is listed on multiple exchanges, including the SIX Swiss Exchange in U.S. dollars and Swiss francs, Euronext Amsterdam in U.S. dollars, and Xetra and Euronext Paris in euros. This wide distribution ensures that the ETP is accessible to a diverse group of investors across the region.

The XRP ETP is a “physical” product, meaning each share is fully backed by XRP tokens stored in a secure, institutional-grade custody solution. The product is fully collateralized, which adds a layer of security for investors looking to avoid the complexities associated with directly holding cryptocurrencies. With an expense ratio of just 0.50%, the WisdomTree ETP provides a low-cost, efficient vehicle for gaining exposure to the asset.

Why Now? The Ripple Effect on Investor Sentiment

With the legal issues behind it, Ripple and its token XRP are expected to see renewed interest from both retail and institutional investors. The timing of WisdomTree’s XRP ETP launch is significant, coinciding with a rise in “risk-on” sentiment among crypto investors. As market confidence grows, altcoins like XRP may outperform more established assets like Bitcoin and Ether.

Dovile Silenskyte, Director of Digital Assets Research at WisdomTree, highlighted this shift, noting that XRP could play an important role in diversifying investment portfolios. “With risk-on sentiment building, altcoin exposures like XRP could outperform a standard bitcoin and ether allocation,” Silenskyte remarked. XRP’s low correlation with traditional asset classes makes it an attractive option for investors seeking diversification and improved risk-adjusted returns.

Cryptocurrencies are now a significant component of global investment portfolios, representing more than 1% of the market. As such, the crypto asset class is increasingly seen as an essential part of a well-rounded investment strategy. XRP, in particular, stands out due to its real-world applications in cross-border payments and its growing market capitalization, which reached $87.2 billion on November 22, 2024.