Asset Managers File for More Crypto ETFs

The new filing by Canary comes as the firm submitted an S-1 registration for a spot XRP ETF last week. Prior to this, another crypto fund manager, Bitwise, lodged a similar application with the SEC for a spot XRP ETF.

Several asset managers have filed new applications with the U.S. Securities and Exchange Commission (SEC) for exchange-traded funds (ETFs) that offer direct exposure to cryptocurrencies, including Litecoin, XRP, and a multi-token fund.

The latest filing by Canary comes as the firm submitted an S-1 registration for a spot XRP ETF last week. Prior to this, another crypto fund manager, Bitwise, lodged a similar application with the SEC for a spot XRP ETF.

The XRP token, launched by the crypto payments platform Ripple in 2012, has a complicated history with regulators. In 2020, the SEC filed a lawsuit against Ripple, accusing the company of conducting an unregistered securities offering through the sale of XRP.

Last year, Ripple scored a partial legal victory when a federal judge ruled that the programmatic sale of XRP to retail investors did not qualify as a securities transaction. Nevertheless, the overall regulatory uncertainty around XRP continues to cast a shadow over the approval prospects for such ETFs.

In other news, Grayscale Investments has filed an application to convert its multi-token fund, the Grayscale Digital Large Cap Fund (GDLC), into an ETF, according to paperwork submitted with the SEC.

The fund tracks the CoinDesk Large Cap Select Index, which represents the market cap-weighted performance of five major cryptocurrencies, including Bitcoin, Ethereum, Solana, XRP, and Avalanche.

If approved, the GDLC fund, which currently trades over-the-counter, will be listed on the New York Stock Exchange (NYSE).

The NYSE has already submitted a 19b-4 filing to the SEC as of Tuesday to facilitate this conversion.

The latest filing marks a potential Grayscale’s fifth ETF launch this year, following the conversion of the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE), along with two smaller versions of these funds earlier in the year.

Nate Geraci, president of financial advisory firm The ETF Store, weighed in on the developments. “In short-term, this is likely [a] call option on November election,” Nate Geraci, president of financial advisory The ETF Store, said in a post on the X platform.

“Politics clearly matter here in the short-term, but I think this is all inevitable over time,” Geraci added.

Bitwise positioning to file for XRP ETF is highly noteworthy IMO…

In short-term, this is likely call option on November election.

But Bitwise is highly credible crypto-native fund firm that doesn’t just throw stuff at wall.

That's simply not in their DNA.

This is strategic.

— Nate Geraci (@NateGeraci) October 2, 2024

The submission of the S-1 form is only the initial step to launch a Litecoin ETF. The SEC must still review the documents and authorize a rule change that would allow a national securities exchange to list the proposed ETF.

The regulatory process typically takes several months. While the SEC has already approved spot Bitcoin and Ethereum ETFs earlier this year, there are still concerns regarding ETFs focused on other digital assets like Litecoin, XRP, or Solana.

The SEC has historically required a regulated futures market to exist for a crypto asset before approving a spot ETF based on it, a condition met by Bitcoin and Ethereum but not yet by Litecoin, XRP, or Solana.

Political factors may also influence the SEC’s decisions on cryptocurrency regulation. According to a recent report by Galaxy Research, Vice President Kamala Harris, who is running for the presidency, has shown a more favorable stance toward cryptocurrency than current President Joe Biden.

TRIGGER ALERT ?

i’m releasing our policy scorecard on the positions of biden, harris, and trump on major bitcoin & crypto issues

bottom line: while trump is undoubtedly more favorable for the industry, we’re optimistic that harris could be more supportive than biden has been pic.twitter.com/qNKeLtppcS

— Alex Thorn (@intangiblecoins) October 14, 2024

Under the Biden administration, the SEC has pursued an aggressive regulatory approach, launching over 100 enforcement actions against crypto firms. On the other hand, Harris, in her campaign, has promised to encourage “innovative technologies” such as cryptos.

However, she is not as supportive of the industry as her rival, former President Donald Trump. In July, Trump promised to dismiss SEC Chair Gary Gensler if he is re-elected.

A wave of new applications for various crypto products has occurred amid a dynamic political environment. However, there are still concerns regarding ETFs focused on other digital assets like Litecoin, XRP, or Solana.

For one, the SEC has historically required a regulated futures market to exist for a crypto asset before approving a spot ETF based on it, a condition not yet met by Litecoin, XRP, or Solana.

A Litecoin ETF is an exchange-traded fund that seeks to