SEC Begins 240-Day Review of Canary Capital's Spot Litecoin ETF

On January 29, 2025, the U.S. Securities and Exchange Commission (SEC) officially confirmed receiving the 19b-4 filing by Canary Capital for a spot Litecoin ETF. This submission initiates a formal 240-day review. The ETF intends to custody the underlying Litecoin to offer investors direct exposure to its price. Meanwhile, Grayscale Investments is working to reattribute its Litecoin Trust (GLTC) to a spot ETF. The SEC put this filing under review on February 6, 2025, giving Litecoin another push of momentum. This is the first non-Bitcoin, non-Ethereum cryptocurrency to achieve this level of regulatory scrutiny around an ETF product.

Litecoin (LTC) is one of the earliest and most well-known cryptocurrencies, launched in 2011 by Charlie Lee. It was conceived as a faster alternative to Bitcoin, with quicker transaction times and lower fees, all with a proof-of-work model similar to that of Bitcoin. Described as the “silver” to Bitcoin’s “gold,” Litecoin is intended to be a more nimble currency for digital transactions. Fast and efficient with 84 million LTC tokens in circulation, and 2.5 minutes per block on average, Litecoin has a strong commitment to speed. For all its years on the scene, though, it never quite felt like something that the broader consumer population would be building into its long-term financial planning — until now.

A Litecoin ETF would enable investors to buy stock that represents the price of Litecoin without needing to worry about interfering with crypto wallets or exchanges. This would make crypto exposure easily and readily available through regular brokerage accounts, translating to no private keys, no wallets and no crypto exchanges, all of which can be intimidating to or risky for traditional investors. Regulated by financial authorities, ETFs offer a level of security and transparency that direct crypto investments often do not provide. This opens the floodgates for institutional money to enter Litecoin. ETFs are traded throughout the day just like stocks, providing liquidity and price transparency. A Litecoin ETF would also serve as a useful tool for diversified portfolios seeking exposure to digital assets outside of Bitcoin and Ethereum.

Analysts say approval could unleash billions of dollars in capital flows. According to the analyst's forecast, the total crypto ETF market to exceed $50 billion of assets under management by the close of 2025 and if Litecoin is one of the first altcoins to achieve this ETF status, then imagine the portion of that pie it would be able to secure. Litecoin has a total market value of about $7 billion, roughly five times it was in November 2017, so much of an influx of institutional funds of any size could result in whiplash.

However, there are risks and limitations to watch. Cryptocurrency prices are famously volatile, and an ETF doesn’t eliminate that risk. Investors could still see deep price swings, particularly in the midst of broader market sell-offs or crypto-centric events. ETFs might not perfectly replicate Litecoin’s performance, for a couple of reasons: management fees, custody costs, and operational expenses. These tracking mistakes can wear away at returns over time, particularly in choppy markets. Although the filings have been acknowledged by the SEC, it isn’t clear approval will be forthcoming. Decisions could be postponed, modifications requested or proposals rejected over fears of market manipulation, or a lack of surveillance-sharing agreements with crypto exchanges.