Grayscale Investments announced on January 13, 2021, that it is closing its Grayscale XRP Trust and liquidating all XRP holdings to distribute cash proceeds to shareholders. The firm cited the U.S. Securities and Exchange Commission’s (SEC) federal lawsuit against Ripple Labs, which alleges XRP is an unregistered security, as the primary reason for the decision.
SEC Lawsuit Triggers Market Turmoil
In its official statement, Grayscale explained that on December 22, 2020, the SEC filed a federal court action asserting XRP is a “security” under federal securities laws. In response, major digital asset trading platforms delisted or suspended XRP trading. Grayscale concluded that “it is likely to be increasingly difficult for U.S. investors, including the Trust, to convert XRP into U.S. dollars, and therefore continue the trust’s operations.”
Trust Liquidation and Shareholder Payout
Grayscale revealed that it has already liquidated the trust’s XRP holdings and intends to distribute the net cash proceeds to shareholders after deducting expenses, reserves, and applicable withholding. The firm emphasized: “The trust will terminate following distribution of the net cash proceeds.” As of January 13, 2021, Grayscale’s total assets under management across all crypto products stood at $24.7 billion. With the closure of the XRP Trust, its product lineup now includes nine investment vehicles: Bitcoin Trust, Bitcoin Cash Trust, Ethereum Trust, Ethereum Classic Trust, Horizen Trust, Litecoin Trust, Stellar Lumens Trust, Zcash Trust, and the Digital Large Cap Fund.
Regulatory Uncertainty Continues to Impact Market
Grayscale’s move is not isolated. Following the SEC lawsuit, exchanges such as Coinbase and Binance US suspended or delisted XRP. The token’s price plunged and remained under pressure. As one of the world’s largest digital asset managers, Grayscale’s decision reinforces market concerns about XRP’s regulatory risk. Analysts note that if the SEC wins, XRP could face stricter regulation; if Ripple prevails, it may set a precedent for other cryptocurrencies. In either case, XRP’s liquidity and investor confidence have been significantly affected.
Grayscale stated it will continue to monitor regulatory developments and may adjust its product strategy accordingly.