The U.S. Securities and Exchange Commission (SEC) announced on June 17 that it has initiated proceedings to evaluate a proposed rule change by Cboe BZX Exchange Inc. regarding the listing and trading of an exchange-traded fund (ETF) called the Franklin XRP ETF. This development marks a significant milestone in the journey toward a spot XRP ETF, reflecting growing institutional confidence in XRP's market structure and maturity.
The proposal, originally filed on March 13, 2025, seeks approval under BZX Rule 14.11(e)(4) for Commodity-Based Trust Shares. The SEC had previously extended the review timeline on April 29 but has now opened formal proceedings under Section 19(b)(2)(B) of the Securities Exchange Act of 1934. As the order states: “The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act to determine whether the proposed rule change should be approved or disapproved.”
ETF Structure and Asset Composition
The Franklin XRP ETF, managed by Franklin Holdings LLC, aims to mirror the performance of XRP's price, before expenses. Coinbase Custody Trust Company LLC will serve as the XRP custodian, while valuation will be determined daily using the CME CF XRP-Dollar Reference Rate—New York Variant. Share transactions, whether creation or redemption, will be conducted in cash or in-kind in units of 50,000 shares.
A central feature of the proposal is the composition of the fund’s assets. The filing states: “The Fund will hold only XRP, cash, and cash equivalents.” The sponsor has emphasized that these components are consistent with the ETF’s investment objective and structure.
SEC's Concerns and Public Comment Period
The SEC's notice outlines concerns around compliance with Section 6(b)(5) of the Exchange Act, which demands rules that deter fraud and safeguard public interest. The SEC has requested public feedback, stating: “In particular, the Commission seeks comment on whether the proposal to list and trade shares of the Trust, which would hold XRP, is designed to prevent fraudulent and manipulative acts and practices or raises any new or novel concerns not previously contemplated by the Commission.” Interested parties are invited to submit written comments via the SEC’s official channels for further assessment.
This formal review follows the SEC's recent approvals of spot Bitcoin and Ethereum ETFs, setting a precedent that could smooth the path for XRP. However, the regulatory history surrounding Ripple Labs and the ongoing legal classification of XRP as a potential security add layers of complexity. Market participants are closely watching the outcome, as approval could not only boost XRP's price but also accelerate the listing of other altcoin ETFs.
The SEC's decision to initiate formal proceedings is widely seen as a positive signal, though the agency has not indicated a timeline for final approval. The comment period will allow stakeholders to weigh in on market manipulation risks, custody arrangements, and the overall integrity of the proposed product. As the crypto industry matures, the Franklin XRP ETF represents a key test case for how regulators approach digital assets beyond Bitcoin and Ethereum.