Grayscale Files to Bring In-Kind XRP Deliveries to GXRP ETF as Custody Network Expands

Grayscale Investments has filed regulatory paperwork with the U.S. Securities and Exchange Commission that would permit authorized participants to exchange XRP directly for shares of its XRP exchange-traded fund, a structural shift that could lower trading costs and tighten pricing efficiency for one of the largest digital asset products on the market. The filing, which amends the registration statement for the Grayscale XRP Trust (ticker: GXRP), opens the door to in-kind creations and redemptions — a mechanism that allows institutional players to swap the underlying cryptocurrency for fund shares without first converting to cash.

“The sponsor may engage additional authorized participants in the future, and such authorized participants may be able to conduct creations and redemptions in-kind, in cash, or both,” the filing states. The changes apply to an existing product that gives individuals brokerage exposure to XRP without requiring them to manage the underlying cryptocurrency themselves. Grayscale began trading GXRP on the NYSE Arca stock exchange on Nov. 24, 2025, following a private offering for eligible investors in September 2024. The fund quickly became one of the more closely watched crypto ETFs, given XRP’s standing as one of the largest digital assets by market capitalization and its central role in cross-border payments.

The timing of the filing is notable. It arrives at a moment when the crypto ETF market is undergoing rapid transformation, with issuers competing to differentiate their products through fee structures, custody arrangements, and operational efficiency. In-kind creation is the latest frontier in that competition, and Grayscale’s move positions GXRP to benefit from the same operational advantages that bitcoin and ether ETFs have begun to enjoy. For investors, the practical implications are straightforward: lower costs, tighter spreads, and a more seamless connection between the ETF’s market price and the value of the XRP it holds.

Direct XRP Delivery Offers Potential Trading Savings

Exchanging XRP directly for ETF shares reduces the fund’s need to buy or sell tokens on the open market, potentially lowering trading costs and improving the experience for everyday investors. Crypto asset manager Bitwise described potential trading efficiencies from in-kind transactions in a July 31, 2025, announcement. The firm identified possible cost savings and a smaller gap between the prices investors pay to buy ETF shares and receive when selling them — a metric known as the bid-ask spread.

The regulatory backdrop shifted meaningfully on July 29, 2025, when the SEC allowed authorized firms to exchange bitcoin or ether directly for shares of covered ETFs, which previously required cash for those transactions. That change opened the way for bitcoin-to-ETF conversions at major issuers and set a precedent that other asset managers were quick to follow. Grayscale’s filing describes a similar process for GXRP, using XRP as the asset exchanged for ETF shares. The SEC’s willingness to embrace in-kind mechanisms reflects a broader evolution in how regulators view digital assets — moving from skepticism toward a framework that acknowledges the maturity of crypto markets and the sophistication of institutional participants.

To understand why this matters, it helps to understand how ETF pricing works. When an ETF is created or redeemed in cash, the authorized participant must sell the underlying asset and deliver dollars to the fund, or receive dollars and buy the asset — an extra step that adds friction and cost. In-kind transactions eliminate that friction. The authorized participant simply delivers XRP and receives ETF shares, or delivers shares and receives XRP. The cost savings may seem small on a per-transaction basis, but across millions of shares and thousands of arbitrage trades, they compound into meaningful efficiencies. For retail investors, the benefit shows up in the form of tighter bid-ask spreads — the difference between what buyers are willing to pay and what sellers are asking — which directly reduces the cost of entering and exiting positions.

How the Creation and Redemption Engine Works

Financial firms address pricing gaps by creating shares when their market price exceeds the value of the XRP backing each share, after expenses, or redeeming them when the price falls below that value. This arbitrage mechanism is the engine that keeps ETF prices aligned with their underlying assets. When the fund trades at a premium, authorized participants can buy XRP, deliver it to the fund, and receive newly created shares to sell on the exchange. When the fund trades at a discount, the process reverses. The ability to transact in-kind streamlines this process, eliminating the need for cash intermediaries and reducing the number of trades required to execute an arbitrage.

Grayscale warns that limited participation risks impaired liquidity, meaning reduced ease of trading, and wider spreads. Authorized firms must submit requests to exchange XRP and ETF shares by 3:59:59 p.m. New York time. The exchange is completed one or two business days later, with the timing agreed upon when the request is submitted. The filing also warns that service disruptions could interrupt processing and that the fund’s classification for U.S. tax purposes remains uncertain. These disclosures underscore the operational complexity of running a crypto ETF, where settlement cycles, custody arrangements, and regulatory classifications all interact in ways that traditional fund managers rarely encounter.

The role of authorized participants is central to the entire system. These are typically large financial institutions — market makers, banks, and broker-dealers — that have agreements with the fund sponsor to create and redeem shares. They are the intermediaries who keep ETF prices in line with net asset value. Without them, an ETF could drift far from the value of its underlying holdings, creating opportunities for arbitrageurs but also risks for ordinary investors. By expanding the range of authorized participants and allowing them to transact in-kind, Grayscale is effectively deepening the liquidity pool for GXRP and making it more resilient to market stress.

Anchorage Joins Coinbase in Safeguarding XRP

Anchorage became eligible to serve as a custodian effective Oct. 5, with Grayscale intending to place part of the trust’s XRP there. Coinbase Custody Trust Company remains the primary provider. Grayscale will determine the allocation between providers as part of risk management as the trust grows. The addition of Anchorage — a federally chartered digital asset bank — diversifies the custody arrangement and reduces concentration risk. Custodians safeguard the fund’s tokens by protecting the private keys needed to transfer them. Anchorage requires multiple key pieces to be combined to authorize a transfer, reducing reliance on any single piece. This multi-signature approach is standard practice in institutional crypto custody, designed to ensure that no single individual or compromised system can move assets unilaterally.

This structure differs from holding and exchanging cryptocurrency directly, with providers controlling the assets on the trust’s behalf. Grayscale expects Anchorage’s holdings and associated keys to remain in cold storage, meaning offline protection, while allowing temporary use of internet-connected wallets for settlement and expenses. The sponsor pays Anchorage’s fees. The custody arrangement is critical because it addresses one of the primary concerns regulators and institutional investors have raised about digital assets: the risk of theft or loss. By layering multiple custodians, cold storage protocols, and multi-signature authorization, Grayscale is attempting to institutionalize the security framework that governs the fund’s assets.

The choice of Anchorage is significant for another reason. Anchorage is one of the few federally chartered digital asset banks in the United States, having received its national trust charter from the Office of the Comptroller of the Currency in 2021. That regulatory status subjects it to federal oversight, including examination by bank regulators — a level of scrutiny that traditional crypto exchanges do not face. For institutional investors who have been cautious about crypto exposure, knowing that a federally regulated bank holds a portion of the fund’s assets provides an additional layer of comfort. It also signals that Grayscale is thinking carefully about the long-term security architecture of its products, rather than treating custody as an afterthought.

GXRP’s Growing Role in Grayscale’s Model Portfolios

GXRP represents one of the largest allocations in Grayscale’s new adviser model portfolios. These portfolios suggest how financial advisers could divide investments among the firm’s funds. As of Aug. 31, GXRP accounted for 11.92% of the Leaders portfolio and 26.11% of Next Gen, which excludes bitcoin. The significant weighting in these model portfolios signals Grayscale’s conviction in XRP’s long-term value proposition. XRP, which Grayscale classified as a global payments asset, is used to pay transaction fees on the XRP Ledger. The ledger’s design emphasizes speed and low cost, making it a favored infrastructure for cross-border payment settlement. Financial institutions and payment providers have explored using XRP as a bridge currency to facilitate international transfers, and the token’s utility extends to decentralized finance applications built on the XRP Ledger.

The model portfolio allocations also reflect a broader trend: asset managers are increasingly treating digital assets not as a monolith but as distinct asset classes with different risk profiles and use cases. Bitcoin serves as a store of value, ether powers smart contract platforms, and XRP facilitates payments. By offering separate funds for each and providing model portfolios that weight them differently, Grayscale is helping advisers construct portfolios that reflect these distinctions. The Next Gen portfolio’s 26.11% allocation to XRP is particularly striking — it suggests that for investors who are already comfortable with digital assets and willing to look beyond bitcoin, XRP is seen as a core holding rather than a satellite position.

The model portfolio approach is part of a broader push by Grayscale to expand beyond its traditional base of crypto-native investors and reach mainstream financial advisers. By providing ready-made portfolio templates, the firm lowers the barrier to entry for advisers who may be interested in digital assets but lack the time or expertise to construct their own allocations. The inclusion of GXRP in these portfolios — at significant weightings — also serves as a form of validation for XRP, signaling to the advisory community that it deserves a place in diversified portfolios alongside more established assets.

Insurance, Risk, and the Road Ahead

The agreement requires commercial crime insurance or a fidelity bond to protect against loss of client assets in Anchorage’s custody, with aggregate limits of at least $100 million. Coverage is shared across customers and is not guaranteed to cover all losses. Contractual liability limits further restrict recovery, potentially leaving some losses uninsured and uncompensated. These disclosures are standard for crypto ETFs but worth emphasizing: insurance coverage in the digital asset space is not a blanket guarantee. The shared nature of the coverage means that in the event of a significant loss, payouts could be prorated across affected customers, and the $100 million aggregate limit may be insufficient to cover all claims.

The filing’s warnings about tax uncertainty add another layer of complexity. The IRS has not issued definitive guidance on how crypto ETFs should be classified for tax purposes, and investors could face unexpected tax treatment. Despite these risks, the broader trajectory is clear. The SEC’s July 2025 decision to permit in-kind creations for bitcoin and ether ETFs marked a turning point, and Grayscale’s filing extends that logic to XRP. As more issuers adopt in-kind mechanisms and custody networks expand, the crypto ETF market is maturing into a more efficient, more institutionalized corner of the financial system. For investors, that means tighter spreads, lower costs, and a growing array of options for gaining exposure to digital assets through traditional brokerage accounts.

Looking ahead, the success of GXRP and similar products will depend on a constellation of factors: regulatory clarity, market conditions, custody security, and the continued development of the XRP ecosystem. The in-kind filing is an important step, but it is one piece of a larger puzzle. What is clear is that the crypto ETF landscape is evolving rapidly, and Grayscale — despite facing intense competition from newer entrants — continues to play a defining role in shaping how traditional investors access digital assets. The XRP trust’s journey from a private offering to a publicly traded ETF with in-kind capabilities and a diversified custody network is a testament to how far the industry has come, and a preview of where it may be headed.