Canary Capital, a newcomer in the investment landscape, has made significant strides in the world of cryptocurrency exchange-traded funds (ETFs). Established just last October, the firm has rapidly gained attention for its ambitious applications targeting various digital assets.
Early Days and Rapid Growth
Although Canary Capital was not in existence when the inaugural spot bitcoin and ethereum ETFs launched last year, it has quickly carved out a niche for itself. The company has filed multiple applications for crypto ETFs, including those focused on Solana (SOL), XRP (XRP), Litecoin (LTC), and Hedera (HBAR). Notably, the applications for Litecoin and Hedera mark a first in the industry.
Strategic Decisions Behind ETF Filings
From an outsider’s perspective, it might appear that Canary Capital had meticulously planned its entry into the ETF market. However, Steve McClurg, the founder and CEO, revealed that the company’s foray into ETFs was somewhat serendipitous.
“We really had no idea that we would be getting back into the ETF game,” McClurg stated. His background includes co-founding Valkyrie Investments, an alternative asset manager acquired by CoinShares in March 2024. Following a brief stint at CoinShares, McClurg launched Canary Capital as a hedge fund, a vision he had nurtured during his previous tenure.
The Political Catalyst
A pivotal moment in Canary’s journey came after a significant political event. McClurg recounted, “There was an assassination attempt on Trump, the markets rallied around it, politics rallied around it, and we started thinking, well, he could actually win.” This led to a strategic pivot toward filing for ETFs, with the anticipation that a potential Trump victory could result in regulatory changes favoring crypto assets.
Targeting Non-Security Tokens
With the success of spot bitcoin and ethereum ETFs in the market, Canary Capital opted not to pursue these assets. Instead, the firm focused on other tokens within the top 20 by market capitalization that they believed were not classified as securities. Ultimately, they filed for ETFs centered on LTC, HBAR, and XRP, with the latter being a calculated bet that XRP would be ruled a non-security in court—a prediction that ultimately came to fruition.
Pending Approvals and Regulatory Landscape
As of now, none of Canary Capital’s ETF applications have received approval from the Securities and Exchange Commission (SEC). Previous attempts to launch Solana ETFs faced setbacks, with several filings denied or ignored under the former SEC leadership in 2024. However, following the inauguration of Trump, the Cboe BZX Exchange resubmitted 19b-4 documents for Solana ETFs, seeking approval under the new administration. The SEC is mandated to respond to these resubmissions within 45 days, or extend the review period to 240 days.
Canary has also filed a 19b-4 for its Litecoin ETF, with an expected SEC response by February 29. However, the firm has yet to submit 19b-4 applications for its XRP and HBAR ETFs. It’s important to note that while an S-1 filing is an initial step toward launching an ETF, it requires a subsequent 19b-4 submission to inform the SEC about proposed rule changes by self-regulatory organizations, like exchanges.
A Calculated Bet on Political Change
McClurg likened Canary’s strategic moves to a call option on Trump’s electoral success. “Oddly enough, it worked,” he remarked, acknowledging the unexpected turn of events that shaped their ETF aspirations.
Looking Ahead
As for future plans, McClurg indicated that while the firm is not currently focused on launching additional ETFs, it remains open to exploring opportunities with other tokens down the road. The evolving landscape of cryptocurrency regulation and market dynamics will undoubtedly play a crucial role in Canary Capital’s next steps in the investment arena.
