Canary Capital Files for XRP Exchange-Traded Fund (ETF) Amid Regulatory Shifts

Canary Capital Group LLC has officially filed an application for an XRP Exchange-Traded Fund (ETF) with the U.S. Securities and Exchange Commission (SEC). This move, as highlighted in a report by Fox Business journalist Eleanor Terrett, marks Canary’s bold entrance into the crypto investment scene. Founded by Steven McClurg, Canary is a relatively new player in the space. However, its decision to push forward with the XRP ETF was driven by signs of a progressive regulatory environment and increasing demand for ETF-based products centered around leading digital assets.

"We are seeing encouraging signs of a more progressive regulatory environment, coupled with growing demand from investors for sophisticated access to cryptocurrencies beyond Bitcoin and Ethereum," said a Canary Capital representative. "Particularly, investors are looking for exposure to enterprise-grade blockchain solutions and their native tokens, like XRP."

Trust Design and Investor Access

Upon reviewing the registration documents, it was revealed that this offering is structured as a continuous offering, and the trust would not fall under the regulation of the 1940 Act. This means that investors in the trust would not receive the same regulatory protections as those provided by funds registered under the act.

The prospectus summary section explained that the trust would allow investors to assess the XRP market through a traditional brokerage account, without the risks associated with directly buying or holding the asset.

"The Trust will not use derivatives that could expose it to additional counterparty and credit risk," the filing reads. "The sponsor believes the design of the Trust will enable certain investors to more efficiently and effectively implement strategic and tactical asset allocation strategies that utilize XRP, by investing in shares rather than directly buying, holding, and trading XRP."

Prospects of Approval

Nate Geraci, president of the ETF Store, noted that the timing of XRP ETF filings is likely tied to the upcoming U.S. elections in November. He emphasized the significance of Bitwise’s recent filing, explaining that the firm’s calculated approach makes this a notable development.

"The point is that an XRP ETF will likely come at some point… Bitwise is simply ahead of the curve. In the short term, politics clearly play a role here, but I think this is inevitable over time. The long-term roadmap for Bitwise seems to involve offering this in an ETF wrapper, with the next step being full tokenization," Geraci stated.

Eric Balchunas, a senior ETF analyst at Bloomberg, sees the filing as a politically strategic move. He described it as a "cheap call option" for U.S. presidential candidate Donald Trump to capitalize on, should he win the upcoming elections. According to Balchunas, there is no chance of these ETFs being approved if Kamala Harris were to win, as the "call option would expire worthless."

The SEC has recently appealed the 2023 Ripple ruling, which had initially been seen as a victory for XRP. According to experts, the approval chances for an XRP ETF largely depend on the outcome of the renewed legal battle, which could take time to resolve.

At the time of writing, XRP was trading at $0.53, having dropped by 11.5% over the last seven days.