ETF Launches Move Forward Without SEC Oversight
Canary Capital announced its intention to launch the first U.S. exchange-traded products linked to Litecoin and Hedera on Tuesday. This move occurs even as the U.S. government shutdown has significantly stalled operations at the Securities and Exchange Commission. Steven McClurg, the firm's founder and chief executive, informed Reuters that these products had already passed internal compliance checks prior to the shutdown halting regular SEC functions. Concurrently, Bitwise Asset Management confirmed its plans to list its new Solana ETF on the same day. Both launches are proceeding as the New York Stock Exchange posted listing notices for four new spot cryptocurrency funds, indicating that trading could commence as early as Tuesday. McClurg stated, "We’ve had several interactions with the SEC over the last year. We were very much ready to go before the shutdown."
Investor Takeaway
These launches are testing the SEC’s new generic listing rules, suggesting that asset managers may no longer require full reviews to list new crypto ETFs.
Testing the New Approval Framework
These funds are the first to be launched under a newly approved streamlined approval system that SEC commissioners adopted in mid-September. This vote permitted national securities exchanges to implement generic listing standards for cryptocurrency and commodity exchange-traded products, thereby eliminating the necessity for product-specific scrutiny that had previously caused delays of several months for issuers. Under the revised rules, asset managers are able to list spot crypto ETFs provided they meet specific criteria concerning custody, pricing data, and market surveillance. This development follows the successful introduction of spot bitcoin and ether ETFs in 2024, which collectively attracted billions in assets and demonstrated investor interest in broader digital asset exposure. Prior to this policy change, each fund required approval from two distinct SEC divisions: one responsible for reviewing the exchange's rule change and another for evaluating the fund's structure. The current framework is consistent with the 2019 ETF rule, which simplified procedures for traditional equity and bond funds.
Government Shutdown and Industry Surprise
The timing of these launches has surprised many in the market. With the SEC operating at a reduced capacity due to the ongoing government shutdown, issuers had not anticipated any progress on pending applications. However, the posting of NYSE listing notices late Monday indicated that both exchanges and issuers are moving forward under the new rules, effectively sidestepping staff-level intervention. The New York Stock Exchange has listed a total of four spot crypto ETFs, including the Canary Capital Litecoin and HBAR Fund, the Bitwise Solana Fund, and the Grayscale Solana Trust, which is scheduled to debut on Wednesday. These funds are being introduced after last year's approval of bitcoin and ether ETFs and, in some instances, incorporate staking features that allow investors to earn token-based rewards. SEC officials were unavailable for comment due to the shutdown. A source familiar with the process indicated that exchanges appear to be utilizing "standing authority" granted by the September vote to proceed with compliant listings.
Investor Takeaway
If these listings prove successful, they could pave the way for the introduction of dozens of new spot crypto ETFs tied to smaller tokens, thereby expanding the market beyond bitcoin and ether.
Industry Outlook
McClurg indicated that Canary Capital plans to release additional crypto products in the upcoming weeks rather than launching them all simultaneously. He told Reuters, "There are a lot of filings we’ve still got out there that we don’t have that level of comfort with," suggesting that further coordination with regulators will be necessary once the shutdown concludes. Analysts at ETF.com commented that the updated listing framework provides asset managers with increased flexibility for innovation. Dave Nadig, head of research at ETF.com, stated, "The standardized listings give the whole industry plenty of room. It allows issuers to bring new products to market without getting stuck in review cycles." Several other companies, including Grayscale and VanEck, are also preparing new applications for token-linked ETFs as investors seek diversification beyond major cryptocurrencies. The next series of approvals may encompass funds linked to Cardano, Avalanche, and Polkadot, contingent on market demand and liquidity. While the SEC's leadership has advocated for greater uniformity in crypto oversight, its reduced staffing levels have consequently slowed formal communications. For the present, the new regulations have effectively empowered exchanges to introduce compliant products to the market, even in the absence of routine agency operations. The initial trading day for these new ETFs will serve as a crucial test of both investor demand and the resilience of the SEC's new regulatory shortcut.