On 19 February 2025, the United States Securities and Exchange Commission (US SEC) published Release No. 34-102449 regarding a proposed rule change filed by Cboe BZX Exchange, Inc. (BZX) to list and trade shares of the Canary XRP Trust. The proposed listing falls under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares.
The Canary XRP Trust was established as a Delaware statutory trust on 3 June 2024, with Canary Capital Group LLC serving as its sponsor. The Trust is designed to provide investors with exposure to XRP, a widely used cryptocurrency associated with the XRP Ledger, without the need for direct ownership. The proposal follows a series of similar applications to list exchange-traded products (ETPs) based on cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), which the US SEC has reviewed under its regulatory framework.
According to the US SEC filing, the Canary XRP Trust will not be classified as an investment company under the United States Investment Company Act of 1940 or a commodity pool under the United States Commodity Exchange Act (CEA). Instead, it is structured similarly to other cryptocurrency-based trusts, aiming to track the performance of XRP.
The US SEC has applied a “significant market surveillance” test (often referred to as the Winklevoss Test) when evaluating cryptocurrency-related products. Under this standard, the US SEC assesses whether the listing exchange has a comprehensive surveillance-sharing agreement with a regulated market of significant size that trades the underlying asset.
In prior decisions, the US SEC has approved Bitcoin and Ethereum-based exchange-traded products despite acknowledging that their respective futures markets were not of “significant size”. Instead, the US SEC accepted that other mechanisms for market surveillance and fraud prevention were sufficient.
In its filing, Cboe BZX argues that XRP should be treated similarly, stating that its liquidity, trading volume, and decentralized structure reduce risks of market manipulation and fraud. The proposal also discusses recent US SEC legal rulings on XRP, referencing SEC v. Ripple Labs, which provided clarity on the asset’s classification.
If approved, the Trust will list and trade its shares in compliance with US SEC regulations and will be subject to BZX Rule 14.11(e)(4), which governs the listing standards for Commodity-Based Trust Shares. The Trust will also comply with US SEC Rule 10A-3, to ensure that the appropriate corporate governance measures are in place.
To enhance transparency, the Trust will provide daily disclosures on Net Asset Value (NAV) per share, Intraday indicative values (IIV), Market prices and trading volumes, Holdings of XRP in the Trust’s custody. The Trust will not engage in direct purchases or redemptions of XRP for investors. Instead, it will operate through cash-based transactions, where shares can be created or redeemed only through authorized participants.
The Canary XRP Trust’s administrator and custodian will oversee the safekeeping of XRP assets, ensuring compliance with security and risk management practices. Transactions will be settled using cold storage wallets, enhancing the security of digital asset holdings.
The US SEC’s review period allows for public comments on the proposal before making a final determination. Under the United States Securities Exchange Act of 1934, the US SEC has 45 days from the filing date (6 February 2025) to approve, disapprove, or extend the review period. If extended, the review may last up to 90 days.
If approved, the Canary XRP Trust would become one of the first XRP-based exchange-traded products available in US markets. The move could broaden institutional and retail access to XRP, similar to how Bitcoin and Ethereum spot ETFs have expanded investment opportunities in digital assets.
(Source: https://www.sec.gov/files/rules/sro/cboebzx/2025/34-102449.pdf)
