First Spot Litecoin ETF Filed with SEC by Canary Capital

Canary Capital, the Nashville-based asset management firm, has filed an S-1 application with the US Securities and Exchange Commission (SEC) to launch the first spot Litecoin (LTC) exchange-traded fund (ETF) in the United States.

The filing comes just days after the company submitted a similar application for a spot XRP ETF. This marks a major development for Litecoin, signaling growing institutional interest in the digital asset, which is often compared to Bitcoin as a decentralized and widely adopted cryptocurrency.

Rising Institutional Interest in Litecoin

Litecoin founder Charlie Lee is optimistic about the potential approval of the ETF, citing growing institutional demand for Litecoin. Lee pointed to the daily increase in the Grayscale Litecoin Trust, which is currently trading at more than double its net asset value (NAV), as a strong indicator of this demand.

Additionally, Litecoin’s similarities to Bitcoin such as its proof-of-work consensus model and its status as a commodity could position the cryptocurrency for a favorable ETF approval process.

Consequently, many believe that Litecoin is a more straightforward candidate for an ETF than other cryptocurrencies like Solana, which faces a different set of regulatory challenges. For example, Litecoin did not have a pre-mine or token sale when it launched, supporting the argument that LTC should not be classified as a security. Solana, on the other hand, had a token sale and used a proof-of-stake mechanism.

Challenges for Other Cryptocurrencies in the ETF Space

While the Litecoin ETF filing has sparked optimism, other cryptocurrencies face hurdles in launching similar ETFs. For instance, the SEC’s ongoing lawsuit against Coinbase claims that Solana’s native token, SOL, is a security. This lawsuit complicates Solana’s prospects for a spot ETF approval, as the SEC’s classification of crypto assets could impact future decisions.

Some analysts have suggested that a change in administration after the 2024 US elections could alter the SEC’s stance, making Solana-based ETFs more likely under a different regulatory regime.

Grayscale’s Dominance and Global ETPs

According to Coinshare report, the US market for Litecoin-related exchange-traded products (ETPs) is dominated by the Grayscale Litecoin Trust (LTCN), which holds $127.4 million in assets under management (AUM).

Comparatively, European Litecoin ETPs hold $11.5 million in combined AUM, highlighting the dominance of the Grayscale product in the global market. Hence, the introduction of a spot ETF could provide US investors with a more accessible and cost-effective way to invest in Litecoin, especially as demand for crypto-related ETFs continues to rise.