Canary Capital Files for First Staked TRX ETF, Sparking Regulatory Debate

Canary Capital has submitted a proposal to the US Securities and Exchange Commission (SEC) for the launch of the Canary Staked TRX ETF. This filing, made on April 18, aims to provide investors with exposure to the price movements of TRX while incorporating staking features. The ETF would hold actual TRX tokens, with custody managed by BitGo Trust Company, marking the first ETF related to TRX.

The proposed ETF represents an effort to broaden crypto investment products beyond traditional spot holdings, exploring yield-generating features tied to proof-of-stake (PoS) blockchain networks. However, the inclusion of staking in US-listed crypto ETFs remains a contentious regulatory issue. Staking is a fundamental aspect of PoS networks like Ethereum (ETH) and Tron, but the SEC has historically prevented it from being included in crypto exchange-traded products (ETPs).

Initial Ethereum ETF proposals included staking features but were later required to remove them during the review process. The SEC has expressed multiple concerns about integrating staking into regulated financial products, including redemption timelines that could disrupt the standard T+1 settlement cycle, tax treatment complexities related to staking rewards, and questions about whether staking services could constitute an unregistered securities offering.

Representatives from the crypto industry met with the SEC’s Crypto Task Force on Feb. 5 to present models addressing these concerns, such as using third-party services for staking and liquid staking tokens. Additionally, Senator Cynthia Lummis and other US senators sent a letter to the SEC in February, requesting clarity on the exclusion of staking and arguing that the current policy disadvantages US asset managers compared to international competitors.

Despite these discussions, the SEC has delayed decisions on two major rule changes related to crypto ETPs, including the Grayscale Ethereum Trust’s request to stake a portion of its holdings. Decisions are now expected by June 2025. The filing by Canary Capital for the staked TRX ETF comes at a time when there is significant advocacy among lawmakers and industry figures for the inclusion of staking in crypto exchange-traded products. This move underscores the growing interest and potential for staked ETFs, which could provide investors with exposure to the returns from staking while offering the convenience and regulatory oversight of an ETF structure. This development is part of a broader trend in the crypto industry, where there is increasing demand for innovative financial products that cater to the unique characteristics of digital assets. The filing by Canary is likely to spark further debate and discussion around the regulatory framework for staked ETFs and could pave the way for similar products in the future.