The ongoing debate in the U.S. Senate regarding the Clarity Act has sparked renewed interest in the treatment of XRP and various cryptocurrency products under American regulations. Emerging reports suggest that this legislation could significantly clarify the status of tokens associated with U.S.-listed exchange-traded funds (ETFs), nudging them closer to a commodity-like classification.
Since their launch in November 2025, XRP spot ETFs have attracted substantial capital, boasting inflows of approximately $1.37 billion. This figure underscores the growing attention from lawmakers and market analysts, emphasizing the critical need for clear regulatory frameworks.
At the heart of the ETF operational mechanisms is the concept of “in-kind” creation and redemption. This process allows funds to accept the actual asset rather than cash during transactions. While this structure is genuine, it limits ordinary investors; only authorized participants, such as large broker-dealers and market makers, can directly deliver tokens to the ETFs in exchange for shares. Average investors participate in the market by buying or selling ETF shares on exchanges, creating a notable divide that raises questions about whether ETFs can effectively operate like banks.
The XRP ETFs are categorized as In-Kind Funds, facilitating direct deposits of XRP into the ETF in exchange for shares of equivalent value. As regulatory frameworks become clearer with the Clarity Act, many investors are expected to opt for this in-kind method, which presents several advantages. This structure may allow individuals to utilize the ETF similarly to a bank, providing a secure storage option for their tokens while retaining accessibility.
Voices from the XRP community reflect a hopeful vision where ETFs could serve as regulated storage for token holders. Advocates such as Chad Steingraber have been vocal about the benefits of in-kind mechanics, suggesting that this would enable investors to exchange XRP for corresponding ETF shares. This arrangement could help mitigate risk by allowing token holders to safely store their assets until they decide to make further transactions.
Additionally, discussions surrounding tax implications for ETF structures highlight that utilizing in-kind creation and redemption may aid in avoiding routine capital gains distributions at the fund level, fostering a more tax-efficient environment for investors. However, the tax consequences for token holders will depend largely on how transactions are executed and the legal architecture of the product. Under existing U.S. regulations, any transfer that alters the asset’s form may trigger taxable events, complicating matters for those relinquishing their assets.
Steingraber argues that the in-kind structure provides XRP holders with a secure, regulated avenue to manage their tokens. He asserts that investors are likely to lean towards ETFs once the Clarity Act delivers definitive regulatory guidance. The real allure lies not only in the mechanics but also in the assurance of being able to hold XRP in a compliant, organized financial product. For many, ETFs present an enticing opportunity to safeguard their tokens while maintaining access as needed.
