The cryptocurrency investment firm Bitwise has submitted an updated S-1 registration document to the U.S. Securities and Exchange Commission (SEC), to advance its Ripple (XRP) ETF application process. The update focuses on the trust structure, custody arrangements, and share creation and redemption mechanisms.
The filing states, “Investors who decide to buy or sell Shares of the Trust[Bitwise XRP ETF] will place their trade orders through their brokers and may incur customary brokerage commissions and charges. Prior to this offering, there was no public market for the Shares. Investing in the Trust involves risks similar to those involved with an investment directly in XRP and other significant risks.”
The Second Bitwise XRP ETF
As per the filing, The XRP Custody Agreement thus ensures that the Trust’s assets remain separate from the custodian’s other holdings, enhancing the security of the private keys associated with the XRP.
Bitwise is planning to use cold storage to keep trust assets and only store a small amount of assets in hot wallets to meet daily operational needs. The investment firm has appointed a chief executive agent to conduct XRP transactions across multiple trading platforms such as Bitstamp, Kraken, Coinbase, and LMAX to enhance trading efficiency. The Chief Executive agent will also offer short-term financing in the form of Trade Credits for a timely order execution even when the Trust’s funds or XRP are not immediately present.
The firm has shared that it will be creating and redeeming shares in blocks of 10,000 units, referred to as Baskets, and the Basket Amount (or the required XRP per Basket) will be recalculated daily after considering accrued fees and expenses.
This submission comes in after the first S-1 form on October 2, where Bitwise first tried to introduce an XRP ETF into the US market. In the second filing, Bitwise acknowledged the regulatory uncertainties surrounding XRP, as an SEC appeal in the case is pending and could shape up the nemesis of Bitwise XRP ETF launch.
As a result, the investment firm has made it clear that if XRP is classified as a security, it would liquidate its holdings under the terms of the ‘Trust Agreement’. In the filing, Bitwise has also discussed measures that are meant to protect investors and ensure compliance with federal securities laws.
Lastly, Bitwise has confirmed that Coinbase Global, which is affiliated with both the Prime Execution Agent and the XRP Custodian, maintains a commercial crime insurance policy of up to $320 million, covering a range of risks, including theft, fraud, and cyberattacks which is insufficient.
The company concluded, “The insurance maintained by Coinbase Global is shared among all of Coinbase’s customers, is not specific to the Trust or to customers holding XRP with the XRP Custodian or Prime Execution Agent, and may not be available or sufficient to protect the Trust from all possible losses or sources of losses.”
