Investment Company Files for First Spot Litecoin ETF

Litecoin (LTC) saw a brief surge, following an official filing by Canary Capital, an investment firm with a focus on crypto, for a spot Litecoin ETF.

This filing marked the first attempt to get regulatory approval for an ETF tied directly to the spot prices of LTC, which currently ranks as the 27th largest cryptocurrency by market capitalization.

The Litecoin ETF’s underlying trust will exclusively hold LTC, aiming to mirror Litecoin’s price while accounting for operational expenses. For security, most of the LTC will be stored in offline cold storage to minimize hacking risks, with the custodian managing both cold and hot wallet systems. A small amount of assets will remain in hot wallets for quick transactions.

Shares in the ETF will be issued and redeemed in bulk by Authorized Participants, typically broker-dealers. These participants will exchange cash for newly issued shares of the ETF and receive cash back when shares are redeemed.

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Although Authorized Participants won’t directly handle Litecoin, their involvement in share creation and redemption could affect the LTC market, potentially causing price shifts due to arbitrage between the ETF’s share value and Litecoin’s market price.

Canary Capital’s recent ETF proposal for Litecoin came shortly after its earlier filing this month for an XRP ETF. Both Litecoin and XRP are also offered through Grayscale’s trusts—the Grayscale Litecoin Trust (LTCN) and the newly launched Grayscale XRP Trust (XRX).

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The Litecoin Trust, launched in 2018, allows investors to gain price exposure to LTC without the hassle of direct crypto ownership, while the XRP Trust began just last month.

These ETF applications come amid growing interest in crypto investments, spurred by the recent introduction of spot Bitcoin and Ethereum ETFs in the U.S. If approved, the proposed ETFs could boost liquidity and stabilize the prices of these crypto assets. However, regulatory approval remains uncertain, as the SEC continues to view most cryptocurrencies, apart from Bitcoin and Ethereum, as securities.

Kosta Gushterov