Grayscale XRP Trust ETF (GXRP) - Annual Report Review (Fiscal Year Ended December 31, 2025)

Unlock the insights into the Grayscale XRP Trust ETF. This review cuts through the complexity of its annual report for the fiscal year ended December 31, 2025, offering a clear, investor-focused summary. We explore its operations, financial performance, key developments, and risks, helping you understand its market position and future outlook.

1. Business Overview and Key Developments

The Grayscale XRP Trust ETF (formerly "Grayscale XRP Trust") offers investors direct exposure to the price movements of Ripple's digital asset, XRP. Its primary goal is for the value of its shares to mirror XRP's price, after accounting for the Trust's operating expenses. The Trust holds only XRP; it does not engage in active trading, leverage, or derivatives. Its operations are limited to holding XRP, issuing shares for cash, and redeeming shares for cash.

As of December 31, 2025, the Trust held approximately 110 million XRP tokens, representing about 0.20% of the total XRP in circulation. This holding does not significantly influence the development or governance of the XRP network.

Fiscal year 2025 transformed the Trust:

• ETF Conversion and Listing: On November 20, 2025, the Trust officially converted to an ETF structure and renamed itself the Grayscale XRP Trust ETF. Just four days later, on November 24, 2025, its shares began trading publicly on the NYSE Arca exchange under the ticker symbol "GXRP." This pivotal moment significantly broadened access for everyday investors, who can now easily buy and sell shares through traditional brokerage accounts. Previously, only "accredited investors" (those meeting specific income or net worth requirements) could access the Trust.

2. Financial Performance

For the fiscal year ended December 31, 2025, the Grayscale XRP Trust ETF reported these key financial metrics:

• Assets Under Management (AUM): The Trust ended the year with approximately $66 million in Assets Under Management, calculated from its XRP holdings and the prevailing market price.
• Net Asset Value (NAV) per Share: As of December 31, 2025, the Net Asset Value per share stood at $6.60, representing the total value of its XRP holdings minus liabilities, divided by the 10 million shares outstanding.
• Performance and Tracking: The ETF's share price largely mirrored XRP's performance. However, due to its cash-only system for creating and redeeming shares, and differences in trading hours between traditional markets and crypto exchanges, the ETF averaged a tracking error of 0.50% relative to the XRP spot price. This means its performance deviated by half a percentage point from XRP's price movements on average.
• Expense Ratio (Sponsor Fee): The Trust charges an annual Sponsor Fee of 1.50% (or 150 basis points) of its AUM. This fee accrues daily and deducts from the Trust's assets, which reduces investor returns.
• Operating Expenses: Beyond the Sponsor Fee, the Trust incurred approximately $1.2 million in other operating expenses for the year, covering custody, administration, audit, and legal services.
• Revenue and Profit: As a passive investment vehicle, the Trust does not generate traditional "revenue" or "profit." Its financial performance depends directly on the appreciation or depreciation of its underlying XRP assets, after accounting for its operating expenses.

3. Management's Discussion and Analysis (MD&A) Highlights

Management's discussion focuses on the Trust's operational evolution, financial condition, and factors affecting its results.

• Results of Operations: The Trust's financial performance directly reflects the market price of XRP. During fiscal year 2025, the value of the Trust's assets mirrored XRP's market movements. Primary deductions from its asset value included the 1.50% Sponsor Fee and other operating expenses totaling $1.2 million. The average tracking error of 0.50% indicates that while the ETF generally followed XRP's price, operational factors and market dynamics caused some deviation.
• Financial Condition: As of December 31, 2025, the Trust's financial condition shows $66 million in AUM, primarily consisting of XRP tokens. Liabilities are minimal, mainly comprising accrued operating expenses. The Trust maintains minimal cash balances, with the vast majority of its assets held in XRP.
• Liquidity and Capital Resources: The Trust manages its liquidity through its creation and redemption mechanism. Currently, only "Authorized Participants" (specialized financial institutions) can create or redeem shares, and they must do so using cash. This cash-only system can introduce inefficiencies, potentially causing the ETF's share price to trade at a premium or discount to its NAV and contributing to tracking error. The Sponsor actively explores implementing "in-kind" creations and redemptions (direct exchange of XRP for shares) in the future to enhance liquidity and improve price tracking. The Trust itself does not engage in borrowing or lending and therefore carries no debt.
• Operational Highlights and Developments: The successful conversion to an ETF and subsequent listing on NYSE Arca represented the primary operational achievement, significantly enhancing liquidity and accessibility for investors. The year also saw significant changes in the Trust's management structure. Grayscale Investments, LLC sponsored the Trust until the end of 2024. Effective January 1, 2025, Grayscale Investments Sponsors, LLC (GSIS) and Grayscale Securities, LLC (GSO) assumed co-sponsorship. However, GSO soon withdrew, and by May 3, 2025, GSIS assumed sole sponsorship. This consolidation streamlined the management structure for the Trust.

4. Financial Health and Asset Security

The Trust maintains a strong financial health profile, typical for a passive ETF. It securely holds its XRP assets, never loaning them out, pledging them, or using them as collateral for any loans or other financial arrangements. This policy crucially protects investors by ensuring the underlying assets are dedicated solely to the Trust.

• Custody: Coinbase Custody Trust Company, LLC, a regulated custodian, holds the Trust's XRP in cold storage. They store private keys offline to minimize hacking risks. Regular audits and security protocols safeguard these assets.
• Cash Holdings: The Trust maintains minimal cash balances, primarily to cover accrued expenses, with the vast majority of its assets held in XRP.
• Audit: An independent registered public accounting firm audited the financial statements for the fiscal year ended December 31, 2025. The firm issued an unqualified opinion (a "clean" opinion), indicating that the financial statements fairly present, in all material respects, the financial position of the Trust.

5. Risk Factors

Investing in GXRP carries significant risks, primarily due to the volatile nature of digital assets and the evolving regulatory landscape:

• XRP Price Volatility: XRP's price is highly speculative and subject to extreme fluctuations. Investors could experience substantial losses, including the total loss of their investment, if XRP's price declines.
• Regulatory Uncertainty: This is a paramount risk.
  • "Is XRP a Security?": Ongoing legal and regulatory debates, particularly with the SEC, about whether XRP is a "security" could severely impact its value and market liquidity. An adverse ruling may significantly restrict XRP's trading and potentially even lead to the Trust's termination.
  • New Regulations: Governments globally consider new laws for digital assets. Stricter regulations on trading, custody, or taxation may negatively affect XRP's value and the Trust's operations.
  • Tax Implications: The tax treatment of digital assets remains complex and uncertain, potentially leading to unexpected tax liabilities for the Trust or its shareholders.
• Market Dynamics:
  • Digital Asset Market Instability: The broader crypto market has experienced extreme volatility, liquidity crises, and a loss of investor confidence in recent years, which directly impacts XRP.
  • Concentration of Ownership: A relatively small number of large holders control a significant portion of XRP. Large-scale selling by these holders could trigger sharp price declines.
  • Competition: The emergence of new digital assets or blockchain technologies could draw investment away from XRP, impacting its long-term value.
• Operational Risks:
  • Tracking Error: As noted, the ETF's share price may not perfectly track XRP's price due to operational factors, market hours differences, and the cash-only creation/redemption process, leading to premiums or discounts.
  • Custody and Cybersecurity: While a regulated custodian holds XRP in cold storage, the risk of hacks, cyberattacks, or loss of private keys, though mitigated, we can never entirely eliminate. Such an event could lead to the loss of Trust assets.
  • Third-Party Reliance: The Trust relies on various third-party service providers (custodian, administrator, transfer agent, index provider). The failure or inability of any of these key partners to perform their duties could disrupt the Trust's operations or lead to losses.
  • Conflicts of Interest: Grayscale Investments, as the Sponsor, manages other digital asset trusts and products. Potential conflicts of interest may arise if Grayscale's decisions or actions regarding other products or its broader business strategy conflict with the best interests of GXRP shareholders.
• Index Risk: The Trust relies on a specific "Index Price" to value XRP. If this index is compromised, inaccurate, or ceases to function, it could affect the valuation of the Trust's assets and its share price.

6. Competitive Position

The Grayscale XRP Trust ETF operates in a dual competitive environment:

• Against other XRP investment vehicles: While GXRP offers one of the most accessible, regulated ways to gain XRP exposure in the U.S., it competes with direct XRP purchases on crypto exchanges, other potential XRP trusts, or exchange-traded products (ETPs) that may emerge globally. Its regulated ETF structure provides a key competitive advantage, offering investors easy access through traditional brokerage accounts and potentially greater liquidity than direct crypto holdings.
• Against other digital assets: XRP itself competes with a vast array of other cryptocurrencies and blockchain projects for market share, developer interest, and institutional adoption. GXRP's success is inherently tied to XRP's ability to maintain and grow its relevance in the broader digital asset ecosystem.

7. Future Outlook and Strategic Direction

The future outlook for the Grayscale XRP Trust ETF depends heavily on the trajectory of XRP and the broader digital asset market, alongside the evolving regulatory environment.

• Strategic Direction: The most significant strategic shift for the Trust in 2025 was its conversion to an ETF and subsequent public listing. This move fundamentally changed its market approach, aiming to capture a broader investor base. The consolidation of the Sponsor role under Grayscale Investments Sponsors, LLC (GSIS) by May 2025 established a clear and unified leadership structure for the Trust's ongoing operations. The Sponsor's future strategic initiatives include exploring "in-kind" creation and redemption mechanisms to enhance the ETF's efficiency and tracking accuracy.
• External Factors and Outlook:
  • Market Trends: The report highlights that "recent developments in the digital asset economy have caused extreme volatility and disruption in digital asset markets, a loss of confidence... and market-wide declines in liquidity." This ongoing market instability significantly influences GXRP's performance.
  • Regulatory Environment: While the SEC's approval for the ETF's listing on NYSE Arca in September 2025 marked a positive regulatory milestone for the Trust itself, the overarching regulatory uncertainty surrounding XRP's classification and potential new digital asset laws (both in the U.S. and internationally) remains the most critical external force shaping the Trust's future.
  • XRP Ecosystem Development: The long-term value of XRP, and thus GXRP, depends on the continued development and adoption of the XRP Ledger for cross-border payments and other use cases. The Trust's performance depends heavily on the success of Ripple and the broader XRP community in driving utility and demand for the asset.