SEC approved first Bitcoin ETFs early in 2024, opening investment avenues for traditional and institutional investors.

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• Proposals for Solana, XRP, and Litecoin ETFs under SEC review, with potential to expand U.S. cryptocurrency ETF offerings.
• Canary Capital seeks to launch first Litecoin-based ETF; Bitwise and others propose ETFs for direct XRP exposure.

In early 2024, the cryptocurrency industry reached a significant milestone when the U.S. Securities and Exchange Commission (SEC) approved the first-ever exchange-traded funds (ETFs) for Bitcoin. This long-awaited approval has been seen as a gateway for traditional and institutional investors who had been hesitant to engage directly with Bitcoin, providing them a familiar investment vehicle. 

Following the approval of Bitcoin ETFs, the SEC also recognized Ethereum as a commodity and approved Ethereum-based ETFs. These approvals have set a precedent and now pave the way for a broader range of cryptocurrency ETFs in the U.S. market.

As a result, anticipation is building within the crypto community for the potential approval of additional cryptocurrency ETFs, including those for Solana, XRP, and Litecoin.

Several proposals for these ETFs are currently under review by the SEC. VanEck, for instance, was quick to submit a proposal for a Solana ETF shortly after the first Ethereum ETFs were approved, arguing that Solana functions similarly to other established digital assets like Bitcoin and Ether.

This proposal, along with others for Solana, is still pending, despite early setbacks such as the SEC’s initial rejection of form 19b-4 applications, which temporarily halted their processing.

Moreover, proposals for XRP ETFs have also been submitted. Bitwise and Canary Capital are among the firms that have filed S-1 forms, a necessary step for listing an ETF on U.S. exchanges.

These filings aim to provide investors with direct exposure to XRP without the need to directly purchase or hold the cryptocurrency, which is currently ranked as the seventh-largest by market capitalization.

Canary Capital has not only proposed an ETF for XRP but also aims to introduce the first investment fund based on Litecoin. This cryptocurrency, created in 2011 from Bitcoin’s source code, shares many characteristics with Bitcoin and enjoys a market capitalization of approximately USD $5.5 billion.

Additionally, Grayscale has proposed converting one of its multi-asset trusts into an ETF. This product, known as the “Digital Large Cap Fund” and currently trading under the ticker GDLC, would offer investors exposure to a mix of popular cryptocurrencies including Bitcoin, Ether, Solana, XRP, and Avalanche if converted to an ETF.

These developments underscore a growing trend toward integrating cryptocurrencies into traditional financial products. However, the success of these proposals largely depends on the SEC’s willingness to classify these digital assets suitably. 

Past challenges, such as the ongoing legal disputes between Ripple and the SEC over the classification of XRP as a security, highlight the regulatory hurdles that still need to be overcome.