Author: Weilin, PANews
After Bitcoin and Ethereum spot ETFs were approved by the U.S. Securities and Exchange Commission (SEC) this year, crypto investors have speculated that other token-related ETFs may appear in the future, among which popular tokens such as SOL, DOGE and XRP have received particular attention.
Now, the two crypto asset management companies have made new moves. On October 8, local time, Canary Capital, a US crypto investment company founded in September, submitted an application form S-1 for a spot XRP ETF to the SEC. Just a week ago, crypto asset management company Bitwise also submitted a similar application, and market attention has further increased. Compared with Bitwise, which investors are more familiar with, what is the background of Canary Capital?
Meanwhile, will the spot XRP ETF be approved in the United States and become the third type of crypto asset spot ETF after Bitcoin and Ethereum? Nate Geraci, president of ETF Store, believes that the approval of the XRP ETF is only a matter of "when" rather than "if". However, he expects that approval may not come until after the change of government in the United States.
Canary Capital, which was established only one month ago, joins Bitwise in applying for XRP ETF
Bitwise submitted an S-1 application for the XRP ETF (Exchange Traded Fund) to the SEC on October 2. The company currently manages a Bitcoin ETF BITB and an Ethereum ETF ETHW.
On October 8, crypto investment company Canary Capital also submitted an application for a spot XRP ETF to the SEC. According to its application documents, Canary Capital stated that its ETF will provide customers with access to the Ripple native token (XRP) market through traditional brokerage accounts and eliminate the risks and restrictions involved in directly purchasing and holding tokens. In addition, the investment company also disclosed that its XRP will use the Chicago Mercantile Exchange (CME) CF Ripple Index (a real-time price benchmark product) to track the price of XRP. At the same time, Canary Capital plans to ensure that its ETF does not rely on other derivatives when tracking the value of XRP to reduce possible counterparty and credit risks. At present, Canary Capital has not yet announced the code and potential custodian of its ETF.
Steven McClurg, founder and CEO of Canary Capital, commented on the new development. He pointed out that the company decided to launch the XRP ETF because it saw positive signs in the regulatory environment for cryptocurrencies. He said that investors' growing interest in advanced access to crypto assets inspired the company to take this action. He also mentioned that the demand is not limited to Bitcoin and Ethereum-related products, and more and more investors are looking for investment opportunities like Ripple's native tokens. It is understood that Steven McClurg is the co-founder of Valkyrie Funds.
Canary Capital is a newly established crypto investment company in September. On October 1, Canary Capital announced the launch of the first HBAR Trust in the United States, HBAR is the native cryptocurrency of the Hedera network. In addition to McClurg, Canary Capital is also led by Josh Olszewicz, who serves as a portfolio manager with extensive expertise in the investment and crypto fields. In addition, Canary Capital also provides crypto hedge fund solutions, including the crypto and fixed income "Barbell Strategy" designed for complex and institutional investors.
Will an XRP ETF be approved in the US?
The spot Bitcoin ETF launched in January this year has exceeded expectations, with a total net inflow of approximately $18.68 billion as of October 9. However, the recently launched Ethereum ETF has performed poorly, with a total net outflow of $562 million as of October 9 since its listing in July.
Some analysts believe that the spot XRP ETF may not pass due to the SEC's legal dispute with Ripple. Although the judge has ruled that XRP is not a security and imposed a $125 million civil penalty on Ripple, the SEC is still appealing the ruling. The appeal is being conducted at the U.S. Court of Appeals for the Second Circuit in Manhattan, New York. Since the SEC filed a lawsuit against Ripple Labs, XRP's ranking has dropped from the second largest crypto asset to the seventh largest asset.
Despite the pessimism in the market, some in the cryptocurrency industry still believe that the XRP ETF will eventually be approved. "This shows that ETF providers will pay close attention to changes in the regulatory environment to seize opportunities to launch new products," said Stephane Ouellette, co-founder and CEO of FRNT Financial. "While there is still uncertainty as to whether these products will be approved, it makes sense for two companies from the crypto space to try to expand their product categories."
Nate Geraci, president of ETF Store, said that ETF approval is a matter of when, not if. However, he believes that approval may be delayed until after the change of government in the United States.
Currently, the market attention on XRP has increased significantly. Digital asset giant Grayscale recently launched the Grayscale XRP Trust, giving investors another way to gain exposure to digital tokens backed by the XRP Ledger (XRPL).
Meanwhile, other asset management giants such as VanEck and 21Shares are also seeking ETFs tied to the price of Solana (SOL). However, Grayscale's XRP Trust manages only $1.5 million in assets, while its Solana Trust has more than $73 million in assets.
Eric Balchunas, senior ETF analyst at Bloomberg, said: "Have you heard of the Fed Put option? It's just like the Trump Call option. The current ETF application for XRP, SOL or any other altcoin is like a cheap call option betting on Trump's victory, because SEC Chairman Gensler will leave and anything can happen. If Harris wins the election, these applications will not be approved at all, and this call option will become worthless."
In the derivatives market, a call option is an all-or-nothing bet on an asset reaching a specific price. If the asset reaches the call option's price, there is a big payout. Balchunas' point is that companies that decide to apply for crypto ETF approval, whether it's XRP, Solana or any other crypto asset, are actually betting on Trump winning the presidency.
The SEC has said that spot cryptocurrency ETFs cannot be listed on U.S. exchanges until there is a highly correlated, regulated futures market for the corresponding assets. Katalin Tischhauser, head of investment research at crypto bank Sygnum, pointed out that such a market currently exists only for Bitcoin and Ethereum, but not for other crypto assets. Bitcoin and Ethereum are the only crypto assets with regulated futures markets on the Chicago Mercantile Exchange (CME).
However, Tischhauser also pointed out that Bitwise's XRP ETF application is likely intended to "start the clock," hoping that the SEC's position will change after the election. Earlier this year, Ripple Labs CEO Brad Garlinghouse said after the Ethereum ETF was approved that ETFs for XRP and other crypto assets were "inevitable." He said on Fox Business News: "People want exposure to more than just one commodity."
At present, the applications of Canary Capital and Bitwise have brought hope for the approval of XRP ETF, but the legal dispute between the SEC and Ripple still poses a challenge to the approval of the product, and the upcoming US election results will also affect the process. In the current complex regulatory environment, the future of XRP ETF is full of uncertainty, but it will undoubtedly become a major focus in the crypto market and deserves close attention.
