Canary Capital files for Litecoin ETF with SEC filing

Mila October 15, 2024

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Key Takeaways

Canary Capital’s Litecoin ETF aims to simplify investor access to Litecoin.
The ETF will secure Litecoin in cold storage to minimize security risks.

Canary Capital has officially filed for a Litecoin ETF with the SEC, following its recent submission for an XRP ETF earlier this month.

According to Canary Capital, the ETF will enable investors to avoid the complexities of directly acquiring and securing LTC, which typically involves setting up digital wallets, handling private keys, and navigating exchanges. Instead, investors can buy shares of the ETF that represent the value of LTC.

The trust behind the Litecoin ETF will hold LTC as its sole asset, aiming to track Litecoin’s value minus operational costs. To ensure security, the trust will primarily rely on cold storage, keeping private keys offline to safeguard against hacking risks.

The custodian will manage both cold and hot wallets. A small portion of the assets will be held in hot wallets to facilitate immediate transactions.

Shares of the ETF will be created and redeemed in large baskets exclusively by Authorized Participants, typically broker-dealers. These participants will be responsible for providing cash to the trust in exchange for newly created shares, and in turn, they will receive cash when redeeming shares.

While Authorized Participants will not handle Litecoin directly, their actions in creating and redeeming shares could impact the LTC market, influencing its price due to arbitrage opportunities between the ETF’s share price and Litecoin’s market value.

Most investors will trade shares of the Litecoin ETF on the secondary market under a designated ticker, tracking LTC price movements without holding the asset directly. Authorized Participants can create and redeem share baskets through a cash-based process, without handling Litecoin.

The filing comes at a time when institutional interest in crypto ETFs is at an all-time high, with Bitcoin ETFs recently hitting a combined $60 billion in assets under management. Stablecoins have also seen remarkable growth, reaching a $170 billion market cap.