Canary Capital Joins Race for XRP ETF: What it Means for XRP Price?

Canary Capital, a crypto investment firm, has filed a registration statement with the U.S. Securities and Exchange Commission (SEC) to launch a spot XRP exchange-traded fund (ETF). This move positions Canary Capital as the second asset manager, after Bitwise Asset Management, to pursue an XRP-based ETF, marking a growing interest in bringing XRP to traditional financial markets despite ongoing regulatory challenges.

The filing comes at a pivotal time for Ripple, the company behind XRP, as the SEC continues its appeal regarding the legal status of XRP. This appeal stems from the 2023 court ruling that XRP's programmatic sales to retail investors did not violate securities laws. The legal uncertainty surrounding XRP remains one of the critical factors in determining whether the SEC will approve an XRP ETF.

A Growing Appetite for Crypto ETFs Beyond Bitcoin and Ethereum

Canary Capital's founder, Steven McClurg, highlighted the firm's confidence in the evolving regulatory environment and the increasing demand for access to cryptocurrencies beyond Bitcoin and Ethereum. In a statement, McClurg emphasized that investors are seeking exposure to enterprise-grade blockchain solutions and their native tokens, like XRP, through traditional financial instruments.

"We're seeing encouraging signs of a more progressive regulatory environment coupled with growing demand from investors for sophisticated access to cryptocurrencies," said McClurg. This sentiment echoes the broader trend in the crypto market, where investors are eager to explore assets beyond the most prominent digital currencies, Bitcoin and Ether.

The proposed ETF would allow investors to gain exposure to XRP without directly purchasing or holding the asset, thereby mitigating the risks associated with the complexities of crypto custody. The ETF will track XRP's value using the CME CF Ripple dollar reference rate, which aggregates trade data from multiple Ripple-USD markets operated by compliant crypto exchanges.

Source: sec.gov

Regulatory Hurdles and SEC's Review Timeline

The SEC now has up to 240 days to review Canary Capital's filing, with an initial 45-day period to provide comments. However, the SEC's decision could be influenced by the ongoing legal battle between the agency and Ripple, which has been embroiled in litigation since 2020. The central question revolves around whether XRP is a security, a classification that would complicate the path to ETF approval.

Industry experts have weighed in on the likelihood of approval, suggesting that the outcome of the lawsuit will significantly impact the SEC's stance on XRP ETFs. Nate Geraci, president of the ETF Store, noted that the timing of these filings may be politically motivated, as the November elections could influence regulatory decisions. "The timing for XRP ETF filings is likely a call option on the election. Politics matter here in the short term," Geraci remarked.

Bitwise and Canary Lead the XRP ETF Push

Canary Capital's move follows Bitwise Asset Management's filing of its own XRP ETF on October 2. Bitwise, known for its strategic ETF offerings, has been preparing for this move by incorporating its Bitwise XRP Trust in Delaware. Both Bitwise and Canary are positioning themselves to capitalize on what they see as a potential breakthrough in the U.S. crypto market, driven by the increasing regulatory clarity for digital assets.

If approved, Canary Capital's XRP ETF would offer a gateway for institutional and retail investors to gain exposure to XRP through traditional brokerage accounts, reducing the barriers to entry commonly associated with direct cryptocurrency investments. Canary's filing is a bold step that reflects the firm's belief in the long-term viability of XRP as a valuable asset in the broader crypto ecosystem.

Looking Ahead: The Future of XRP ETFs

While the SEC has yet to approve an XRP ETF, the increasing momentum behind these filings suggests that investor interest is strong, and firms like Canary and Bitwise are prepared to meet this demand. The success of Bitcoin and Ether ETFs earlier this year, which collectively attracted billions of dollars in investment, demonstrates the appetite for cryptocurrency-based financial products.

However, the fate of these filings hinges on the SEC's final decision, which will be shaped by the resolution of Ripple's legal battles and the broader regulatory climate. As the crypto investment landscape continues to evolve, XRP's path to becoming the third major asset to secure an ETF in the U.S. remains uncertain but increasingly promising.