SEC Recognizes Canary's Litecoin ETF Proposal, Opening Public Feedback

The Securities and Exchange Commission (SEC) has acknowledged Canary Capital's Litecoin ETF proposal, opening a public feedback period as the agency inches closer to a potential U.S. listing. This marks a significant milestone for the altcoin ETF landscape, as it is the first such filing to receive official recognition from the SEC.

Litecoin, often referred to as the "silver to Bitcoin's gold," has a long operating history and shares similarities with Bitcoin's structure. Canary Capital filed its S-1 registration with the SEC in October, signaling its intention to provide investors with a unique opportunity to gain exposure to Litecoin through a traditional brokerage account.

The SEC's acknowledgment of Canary Capital's Litecoin ETF proposal sets a 240-day window for a decision, which could potentially lead to a more rapid approval process. This development comes as regulators continue to shape their approach to crypto investment products following the landmark approval of spot Bitcoin ETFs in January 2024 and subsequent Ethereum ETFs in May 2024.

Nasdaq submitted its application for the spot Litecoin fund on January 15 through a 19b-4 filing, representing the crucial second phase of the crypto ETF approval process. The exchange will act as the listing venue for the proposed Canary Capital investment product. Exchange Act Rule 19b-4 mandates self-regulatory organizations like Nasdaq to file proposed rule changes with the SEC, ensuring transparency and compliance with investor protection standards through public disclosure and comment periods.

Canary's proposed Litecoin ETF aims to eliminate technological hurdles that have historically irked mainstream investors. Rather than wrestling with digital wallets and cryptographic keys, investors would gain Litecoin exposure through their standard brokerage accounts. The Canary Litecoin ETF is designed to track the CoinDesk Litecoin Price Index (LTX) and would hold Litecoin through a comprehensive custody framework. Its hybrid model also allows specialized financial firms, known as Authorized Participants, to create and redeem large blocks of ETF shares through an innovative cash-only system.

The SEC is now soliciting public feedback on the Canary Litecoin ETF proposal, with comments due within 21 days after publication in the Federal Register. Industry stakeholders are eagerly awaiting the SEC's decision, which could dramatically influence the future of altcoin ETF applications.