Frequently Asked Questions

Digital Asset ETFs Generally

1What is a digital asset ETF?
A digital asset exchange-traded fund (ETF) gives investors exposure to digital assets within a familiar fund structure. ETFs trade on public stock exchanges and can be bought or sold through most brokerage platforms. These types of products, which buy and hold digital assets, are also referred to as exchange traded products (ETPs).
2Are digital asset ETFs regulated?
Canary’s ETFs are registered with the SEC pursuant to the Exchange Act of 1934 and Securities Act of 1933. Canary’s ETFs are not commodity pools or investment companies registered under the Investment Company Act of 1940 (the “1940 Act”), and therefore are not subject to the same regulatory requirements or protections as mutual funds or traditional ETFs registered under the 1940 Act.
3Do Canary Capital’s digital asset ETFs hold digital assets?

Our ETFs are registered under the Securities Act of 1933 and are designed to buy and hold digital assets in accounts established with regulated digital asset custodians.

Our products provide investors with exposure to digital assets through the holdings of the ETFs. Our products are different from derivatives-based ETFs registered under the 1940 Act, which often provide exposure to digital assets through futures contracts, swaps, or other derivatives.

4Is Canary Capital registered with the SEC or CFTC?
No, Canary Capital is not registered and not required to be registered with the SEC or CFTC to serve as sponsor to our ETFs. Because our ETFs hold digital assets, and such digital assets are not securities or commodities, Canary Capital does not serve as an investment adviser or commodity pool operator in its capacity as sponsor.
5Are Canary Capital ETFs approved by the SEC?
The SEC does not express any opinions on ETFs and does not approve or disapprove of the ETFs. Canary has filed Form S-1 registration statements with the SEC. Once those filings are declared effective, the registrations become active and the ETFs can begin trading on exchange.
6What are the risks associated with digital asset ETFs?

Because digital asset ETFs hold digital assets, the value of a digital asset ETF is directly linked to the price of the underlying holdings, which are known for significant and unpredictable price swings. Investors should be prepared for the possibility of significant volatility and substantial losses.

The legal and regulatory environment for cryptocurrencies is still evolving. Changes in regulations could negatively impact the value of your investment or the operation of the ETFs themselves. Each of our ETFs has specific risks and disclosures that can be found in their prospectuses which are available for review on the applicable product website. Investors should read each prospectus carefully prior to making any investment decisions.

7How are these ETFs different from investing directly in crypto?

ETFs allow for registered custodial and brokerage-based exposure to digital assets without the need for private key management, wallets, or self-custody. They also offer integration with retirement or institutional accounts.

Direct crypto investments require buying and selling on a crypto exchange and are subject to trading fees, spreads, and other costs associated with moving funds in and out of a crypto exchange.

8What is the distribution schedule for Canary Capital’s ETFs?
We do not have any planned distributions or regular distributions from any of our ETFs. Any one-time distributions would be announced publicly well in advance of any applicable dividend date.
9What are the tax consequences associated with holding Canary Capital’s digital asset ETFs?

Unless otherwise noted, our ETFs take the position that they are grantor trusts for U.S. federal income tax purposes.

For an ETF that is a grantor trust, shareholders generally will be treated as if they directly owned their pro rata shares of the underlying assets held in such ETF. Shareholders also will be treated as if they directly received their respective pro rata shares of the ETF income (including staking rewards, discussed more fully below), and directly incurred their pro rata shares of such ETFs expenses (generally limited to sponsor fees). Most state and local tax authorities follow U.S. income tax rules in this regard.

Investors should discuss the tax consequences of an investment in Canary Capital’s ETFs with their tax advisors.

How ETFs Operate

1Can I buy or sell shares directly from an ETF?
No. Individual investors must buy and sell ETF shares through their brokers. The only entities that transact directly with an ETF, creating new shares or redeeming existing ones, are registered broker-dealers known as “Authorized Participants,” who have contractual agreements with the ETFs. Authorized Participants place orders directly with the funds in basket increments (10,000 shares per basket for our ETFs).
2How do Authorized Participants buy and sell shares of ETFs?

Authorized Participants can place buy and sell orders directly with the ETF at the end-of-day net asset value (NAV), which represents the ETF’s assets minus its liabilities and is calculated by the fund administrator. This differs from how individual investors trade ETF shares, which occurs in the market at the prevailing market price.

To create shares, an Authorized Participant delivers cash or in-kind assets equal to the value of the creation order. To redeem shares, the Authorized Participant delivers ETF shares equal to the redemption order and receives cash or in-kind assets in return.

3What are in-kind ETFs?
In-kind ETFs allow for Authorized Participants (but not individual investors) to create or redeem shares of the ETF directly with the ETF through the contribution of digital assets in exchange for shares in the case of a creation or return of shares in exchange for digital assets in the case of a redemption.
4Can I contribute digital assets directly to an ETF?
No you cannot. ETFs are investment funds traded on stock exchanges like traditional securities, so they require traditional currency to buy and sell through a broker. Only Authorized Participants interact directly with ETFs to create or redeem shares in baskets.
5Why do ETFs buy or sell digital assets?
ETFs buy in the case of a creation or sell in the case of a redemption digital assets in connection with creation issuance of new shares or redemption reduction in shares outstanding activity of Authorized Participants.
6Why do Authorized Participants create or redeem shares of ETFs?
Generally speaking, Authorized Participants create or redeem shares of ETFs in response to supply and demand needs of their clients and their own inventory of shares, which are driven by a number of factors including market conditions, individual digital asset characteristics, and the trading volume and activity in the ETFs.

Staking ETFs

1What are staking ETFs?
Staking ETFs are exchange-traded funds that hold crypto-assets, and dedicate those assets to the staking program carried out by the sponsor with the objective of generating additional yield, in the form of additional crypto-assets, from staking rewards earned by participating in the blockchain network's proof of stake validation process. These funds offer investors exposure to the crypto's price movements while also earning additional yield from these staking rewards.
2How are ETF assets staked?
The staking programs of our ETFs are operated through service providers, including the custodians and staking providers. Our staking ETFs are staked directly from custodial wallets through our custodians.
3What are the risks associated with ETFs staking digital assets?

Risks associated with staking are specific to each protocol. Investors should refer to the risks set out in the applicable prospectus for additional information regarding these risks.

Staking ETFs are subject to risks associated with staking providers and network validators. For example, staked assets may be subject to so-called “slashing” penalties. Slashings occur when a validator attests to two different histories of the chain and penalties occur when a validator is offline for a prolonged period of time. While the ETFs themselves do engage in the operation of a validator node, assets dedicated to a validator node would be subject to these risks.

In addition, custodians may lack the assets or insurance in order to support the recovery of any losses incurred. Accordingly, there can be no guarantee that the ETFs would recover any of their staked assets, or the value thereof, if those assets are subject to slashing or other penalties.

4Do Canary’s staking ETFs make distributions of staking rewards to investors?
Our staking ETFs do not make distributions in the form of digital assets. They are permitted to make distributions of cash associated with earned staking rewards, but are not required to do so. Any planned distributions of cash associated with an ETF will be communicated publicly to investors in the same way that dividends are announced.
5Are staking rewards taxed?

Staking ETF assets can earn staking rewards in the form of additional digital assets. It is possible that these rewards will be treated as ordinary income for tax purposes. To the extent that such rewards are regarded as ordinary income, an investor in the ETF is expected to experience a taxable event.

Investors should consult with their own advisors regarding the tax implications of investing in staked ETFs.

Purchasing ETFs

1Where can I buy Canary Capital ETFs?
Our ETFs are available at most brokers, including Charles Schwab, E*TRADE, Robinhood, WeBull, Fidelity, and Vanguard. If you don’t see them, please ask your broker.
2When can I buy your ETFs?
Our ETFs can be bought and sold during the exchange's normal operating hours, typically 9:30 a.m. to 4:00 p.m. Eastern Time on business days, but also during the after-hours and overnight trading sessions, depending on the specific broker.
3How much money do I need to invest in ETFs?
There is no minimum amount of money required to start investing in an ETF.
4How can I trade these ETFs?
You can trade Canary Capital ETFs in the same way you trade shares of other ETFs or equities with your broker. When buying or selling ETFs, you can use a variety of order types, including market orders and limit orders.
5Can I hold a digital asset ETF in a retirement account?
Yes, as long as your retirement account is a brokerage account that allows stock trading, most commonly, self-directed IRAs. Most 401(k)s have limited investment options and digital asset ETFs are unlikely to be offered at this time.