Experts Debate Potential Role of XRP ETF in Ripple On-Demand Liquidity

US Air Force veteran Mark Phillips proposes using XRP ETF as ODL pool, but expert Panos Mekras disagrees.

In a recent tweet, XRP enthusiast and US Air Force veteran Mark Phillips pondered the potential utility of an XRP exchange-traded fund (ETF) within the context of Ripple’s On-Demand Liquidity (ODL).

Phillips believes such a setup could lead to a dual value increase. The tweet read:

“Could an XRP ETF be used as an ODL pool? If so, value would increase both with asset price appreciation AND with ODL utilization.”

Could an $XRP ETF be used as an ODL pool?

If so, value would increase both with asset price appreciation AND with ODL utilization.

This could make an $XRP ETF more attractive than most other investment vehicles.

— Mark Phillips {XRP} (@Mark_Phillips) September 3, 2023

In simpler terms, Phillips is wondering whether an XRP ETF could facilitate cross-border payments in the ODL pool.

In his view, the value of the XRP ETF would increase by two factors if the pool were to be used more frequently. The propelling factor would be the appreciation of XRP and the increased demand for XRP from ODL users.

Moreover, Phillips argued the situation could make an XRP ETF a more attractive investment option than other vehicles.

Crypto Author Thinks Otherwise

Panos Mekras, DigitalGen founder and author of Understanding the Crypto Economy, offered a different perspective. Mekras argued that Phillips’s idea was at variance with the fundamental principles of ODL. He clarified that the essence of ODL relies on the use of a decentralized, neutral digital asset.

Since an ETF does not possess such characteristics, Mekras expressed that the view made no sense.

No, that doesn't make any sense. The value of ODL lies on using a decentralized, neutral digital asset. An "ETF" is none of these.

— Panos ?{X} (@panosmek) September 3, 2023

In response to Mekras‘ critique, Phillips clarified his position. He emphasized that he referred to the possibility of using XRP held within a spot ETF as part of an ODL pool.

However, the crypto author maintained that XRP within an ETF remains locked and reserved. Therefore, the XRP is unsuitable for ODL or any other operational use.

Moreover, Mekras stressed that ODL’s primary function is facilitating XRP purchases on exchanges to fiat currencies for people globally.

According to him, “ODL buys and sells XRP on exchanges for fiat, which means the sold XRP are bought by other people around the world.”

It must be remained "locked" and be held in the reserves. It can't be used for ODL or anything else. ODL buys and sells XRP on exchanges for fiat, which means the sold XRP are bought by other people around the world.

— Panos ?{X} (@panosmek) September 3, 2023

Notably, the conversation around an XRP ETF generally stem from the fact that XRP is the only altcoin with regulatory clarity in the United States. Members of the XRP community believe that XRP qualifies for an ETF much more than Ethereum (ETH) or any other crypto asset.