The XRP ETF paradox: Ripple’s legitimacy came at the cost of crypto’s promise

The launch of the first U.S. spot XRP exchange-traded fund should be an unqualified triumph for Ripple. After years of brutal legal warfare with the Securities and Exchange Commission, culminating in a $125 million settlement in August 2024, the company finally has what it desperately sought: a regulated investment product that gives institutional investors frictionless access to XRP.

But look closer, and the victory reveals an uncomfortable paradox. The same product that validates XRP as a legitimate asset may also represent crypto’s quiet surrender to the centralized financial system it was designed to disrupt. What Ripple celebrates as redemption might actually be a Trojan horse—not for Ripple, but for the broader cryptocurrency movement.

What legitimacy actually costs

The ETF represents undeniable progress for Ripple on narrow terms. Institutional investors can now gain XRP exposure through traditional brokerage accounts without navigating crypto exchanges, custody solutions, or regulatory ambiguity. The product carries the implicit blessing of federal regulators, a stamp of approval that seemed impossible during the darkest days of Ripple’s SEC battle.

This regulatory clarity matters. For years, XRP existed in limbo—traded on exchanges, used by some financial institutions for cross-border payments, yet branded by the SEC as an unregistered security. The settlement resolved that uncertainty, and the ETF arrival confirms XRP has crossed into the realm of acceptable financial products.

Major financial institutions that previously avoided XRP due to legal risk can now participate through a structure they understand. Pension funds, wealth managers, and family offices operate in regulated environments where direct crypto holdings remain complicated. The ETF solves that problem, potentially unlocking billions in institutional capital.

Ripple can also argue the ETF advances its original mission. The company has always positioned XRP as a practical tool for payments and settlements, not speculative gambling. A Wall Street product theoretically lends credibility to that narrative, making it easier to convince banks and payment processors that XRP deserves a place in their infrastructure.

The centralization trap

Yet every benefit comes with a shadow cost that Ripple’s celebration ignores.

Consider what an ETF actually represents. Investors don’t hold XRP directly. They hold shares in a trust that holds XRP, managed by a custodian, cleared through traditional financial infrastructure, and regulated by federal authorities. Every layer adds intermediaries, counterparty risk, and centralized control—precisely what cryptocurrency was designed to eliminate.

The regulatory approval that makes the ETF possible also establishes a template for future oversight. By funneling crypto investment through ETF structures, regulators effectively herd capital away from decentralized exchanges and self-custody—where they have limited visibility—and into supervised channels where traditional enforcement mechanisms apply.

This isn’t theoretical. The ETF prospectus explicitly acknowledges risks that direct XRP holders manage differently: custodian failures, tracking errors, regulatory changes that could restrict the fund’s operations. Investors gain convenience but sacrifice the sovereignty that makes cryptocurrency distinct from traditional assets.

More troubling is what this means for XRP’s governance and development. When the bulk of investment flows through ETFs rather than direct ownership, the economic incentives shift. ETF investors care about price appreciation, not network utility. They have no stake in XRP Ledger governance, no interest in validator networks, no connection to the cross-border payment use cases Ripple championed.

This creates a dangerous dynamic where XRP becomes primarily a speculative vehicle disconnected from its stated purpose. The ETF may pump up XRP’s market capitalization while hollowing out its utility—a Potemkin village of legitimacy with no functional foundation.

The utility question remains unanswered

This brings us to the core issue the ETF neither addresses nor resolves: Does XRP actually do what Ripple claims?

Matthew Sigel of VanEck articulated the skepticism bluntly, questioning whether meaningful development activity occurs on the XRP Ledger or if the token simply serves as a speculative bet. The challenge cuts to the heart of XRP’s value proposition.

Ripple has spent years touting partnerships with financial institutions for cross-border payments. Yet adoption remains modest relative to the grand vision. RippleNet exists and processes transactions, but the gap between Ripple’s marketing and XRP’s real-world traction is substantial.

The ETF does nothing to close that gap. If anything, it may widen it by shifting attention from utility to price. When investors can gain exposure through a convenient fund, why would they care whether banks actually use XRP for settlements? The financial incentive aligns around market dynamics, not network growth.

Without robust, expanding real-world utility, XRP becomes exactly what Ripple insisted it wasn’t during the SEC battle: a speculative token whose value depends on narrative and market sentiment rather than functional demand. The ETF legitimizes that speculation while doing little to advance genuine adoption.

Three futures, one likely outcome

The path forward offers three broad scenarios, though their probabilities differ sharply.

In the optimistic case, the ETF attracts substantial institutional capital, XRP’s price rises, and the attention drives genuine adoption. Banks and payment processors integrate XRP Ledger technology for cross-border settlements, validating Ripple’s decade-long pitch.

The regulatory clarity enables rather than restricts innovation, and the ETF becomes a bridge between traditional finance and functional blockchain utility.

This scenario is possible but requires Ripple to execute flawlessly on technology and partnerships while the macro environment cooperates. The odds are long.

The pessimistic scenario sees the ETF become purely a speculation vehicle. Price volatility continues, tracking errors frustrate investors, and custody failures or security breaches undermine confidence. XRP Ledger activity stagnates while the token trades based on hype cycles.

Regulators eventually tighten rules further, using the ETF structure as leverage to impose restrictions that make crypto less distinctive from traditional assets. The ETF becomes a trap that neuters crypto’s disruptive potential.

The most likely outcome falls between extremes but closer to disappointment. The ETF succeeds modestly, attracting some institutional money and providing Ripple with talking points. XRP Ledger sees incremental adoption—enough to sustain the narrative, insufficient to fulfill the vision. The token persists as a mid-tier crypto asset, legitimate but unremarkable, its revolutionary promise diluted into just another Wall Street product.

In this scenario, the ETF represents not catastrophic failure but quiet surrender. Ripple gains acceptance by conforming to the system it once claimed to transform.

The verdict: Legitimacy as compromise

My assessment is that the XRP ETF represents Ripple’s legitimacy at the expense of crypto’s promise.

Ripple needed this win. After years of legal assault, the company deserves credit for surviving and achieving regulatory recognition. For Ripple as a business, the ETF is unambiguous success.

But measured against cryptocurrency’s broader purpose—creating financial infrastructure that operates outside centralized control—the ETF looks more like capitulation. When crypto’s path to mainstream adoption requires packaging it into traditional financial products, cleared through conventional systems and supervised by federal regulators, we should question whether we’ve achieved adoption or simply recreated what we aimed to replace.

The Trojan horse isn’t that regulators will use ETFs to destroy crypto. It’s subtler and more insidious: ETFs may hollow out crypto’s distinctiveness until nothing revolutionary remains. What enters the gates of institutional acceptance is a neutered version of the technology, stripped of the qualities that made it valuable.

Ripple can celebrate its redemption. The company survived, the token gained legitimacy, and executives can finally claim victory over the SEC. But that personal vindication doesn’t resolve the larger tension.

The XRP ETF proves you can bring crypto to Wall Street. Whether you should—whether doing so preserves anything worth preserving—remains an open and troubling question. Based on historical patterns of financial innovation being absorbed and neutralized by incumbent systems, the answer likely leans toward disappointment.

Ripple won its battle. Crypto may be losing the war.