CoinShares has withdrawn its XRP ETF application without warning. What exactly is going on?

CoinShares, the largest digital asset management company in Europe, manages approximately $10 billion in assets. According to regulatory filings, the company submitted an RW form application to the U.S. Securities and Exchange Commission (SEC) on November 28, withdrawing its proposed registrations for the XRP ETF, Solana Staking ETF, and Litecoin ETF, while gradually halting operations of its Bitcoin futures leveraged ETF.

Strategic Withdrawal on the Eve of 1.2 Billion Dollar Listing

(Source: SEC)

For CoinShares, this decision comes at a critical moment. The company announced in September a SPAC merger valued at $1.2 billion with Nasdaq-listed Vine Hill Capital, which will allow CoinShares to go public in the United States. The transaction is expected to be completed by the end of the year, at which point CoinShares will rank among the top four digital asset management firms globally in terms of cryptocurrency ETF assets under management, alongside BlackRock, Fidelity, and Grayscale.

Choosing to withdraw the ETF application at such a critical milestone for the company is not a coincidence. The SPAC merger means that CoinShares will become a publicly traded company, requiring it to demonstrate a clear path to profitability and a sustainable business model to investors. In this context, continuing to push forward in the fiercely competitive and limited profit space of single asset ETFs may be seen as a waste of resources and a lack of strategic clarity.

According to regulatory documents, the company submitted RW Form applications to the SEC on November 28, withdrawing the registration statements for its proposed XRP ETF, Solana Staking ETF, and Litecoin ETF. Senior Financial Officer Charles Butler signed each withdrawal letter, confirming that there were no securities sold under the previous S-1 registration statement, nor were there any transactions.

This technical detail is important: the lack of securities sales means that CoinShares has not generated any revenue from these ETF projects, but has already invested a significant amount in legal, regulatory, and operational costs. Withdrawing the application can avoid further sunk costs and reallocate resources to more promising areas. The company is also gradually halting the operation of its CoinShares Bitcoin Futures Leveraged ETF, indicating that this is not just an adjustment of a single product, but a comprehensive strategic repositioning.

The crushing advantage of traditional financial giants

CoinShares CEO Jean-Marie Mognetti stated in a statement that, given the dominance of giants like BlackRock, Fidelity, and Grayscale (which manage most of the leading funds in the market), the differentiation and sustainable profit margin in the single-asset crypto ETF space are limited. This statement bluntly acknowledges a harsh market reality: in the cryptocurrency ETF market, brand and scale are decisive factors.

BlackRock's IBIT Bitcoin spot ETF attracted hundreds of billions of dollars in inflows within just a few months of its launch, becoming one of the most successful ETF issuances in history. Fidelity, leveraging its deep trust among traditional investors, has also quickly accumulated a large amount of assets in its cryptocurrency ETF. Although Grayscale faces competitive pressure, it still manages a massive asset scale thanks to its first-mover advantage in converting GBTC into a spot ETF.

In contrast, although CoinShares holds a leading position in the European market, it lacks brand recognition in the U.S. market. For most U.S. investors, when they want to allocate to an XRP ETF or a Solana ETF, they are more likely to choose familiar names like BlackRock or Fidelity if they launch similar products, rather than a product from a European company. This brand disadvantage is particularly fatal in the single-asset ETF market, as there is very little room for differentiation among such products—they all track the price of the same asset, have similar fee rates, and liquidity becomes the only distinguishing factor.

Three Major Competitive Disadvantages Faced by CoinShares

Insufficient brand awareness: Lacks the household name status of BlackRock and Fidelity in the US market.

Disadvantage of Scale: Unable to attract capital inflow by lowering cost rates through economies of scale like the giants.

Liquidity Crisis: The newly launched ETF initially suffers from poor liquidity, creating a vicious cycle that makes it difficult to attract institutional investors.

CoinShares initially submitted its Solana Staking ETF application in June and made several revisions before September. The XRP ETF application was updated in August and October, while the Litecoin ETF application dates back to January. As previously reported by The Block, the U.S. Securities and Exchange Commission (SEC) confirmed the company's submissions for spot XRP and Litecoin ETF applications in February.

This timeline shows that CoinShares has invested a significant amount of time and resources in these ETF projects. From January to November, there was a nearly year-long application and revision process, involving substantial legal fees, regulatory communication costs, and team effort. The final decision to withdraw means that all these investments have become sunk costs. However, from another perspective, cutting losses in a timely manner is wiser than continuing to struggle in a non-profitable market.

New Blueprint for Diversified Strategies

“In the next 12-18 months, we plan to launch more innovative products for the U.S. market across three core categories: crypto equity investment tools covering the digital asset ecosystem beyond tokens; thematic investment portfolios targeting specific blockchain innovation trends; and actively managed strategies that combine cryptocurrencies and other assets using CoinShares' quantitative expertise,” Mognetti wrote. “To better focus on this priority, we are streamlining our U.S. product line, gradually discontinuing the CoinShares Bitcoin futures leveraged product (ticker: BTFX), and reallocating resources previously intended for launching single-asset ETFs to higher-margin investment opportunities.”

This passage reveals CoinShares' future strategic direction, which can be summarized into three core pillars. First, crypto equity investment tools will shift the focus from tokens themselves to companies within the cryptocurrency ecosystem. This may include mining companies, cryptocurrency exchanges, blockchain infrastructure providers, etc. The advantage in this area is that traditional investors find it easier to understand the logic of equity investment, and CoinShares can leverage its expertise in the crypto industry.

Second, thematic investment portfolios provide targeted investments in specific blockchain innovation trends. This may include DeFi themes, NFT themes, Layer-2 themes, AI + blockchain themes, and more. The advantage of this type of product is that it offers investors a “basket” solution without requiring them to research and select individual tokens themselves. The competition in this market is relatively low because it requires deep industry insights to build meaningful thematic portfolios.

Third, active management strategies combine cryptocurrencies and other assets, leveraging CoinShares' quantitative expertise. This is the area where CoinShares is most likely to establish a differentiated advantage. Passive single-asset ETFs are essentially commoditized products, but active management strategies require specialized investment skills and risk management capabilities. If CoinShares can demonstrate sustained returns that outperform the benchmark, it will attract investors willing to pay higher fees.

This strategic shift echoes the comments made by Roger Baston, head of digital assets at Franklin Templeton. He told The Block last week that a diversified cryptocurrency portfolio represents the “next big event” following this wave of single-asset fund trends. This industry consensus indicates that the single-asset ETF market may be nearing saturation, and diversified and thematic investments will become the next growth point.

Long-term Outlook for XRP ETF Market

CoinShares' withdrawal of the XRP ETF application does not mean that this market lacks potential. In fact, with the conclusion of the Ripple vs. SEC lawsuit and the improvement of the regulatory environment, the chances of XRP ETF approval are increasing. However, CoinShares' decision shows that even if a product can be approved, it does not guarantee success in the market.