Why the Issuer Pushing for an XRP ETF Is Bullish on Bringing NFTs to Wall Street

Although some collectors have left NFTs for dead, Canary Capital believes the asset class could find fans on Wall Street. 

In a recent interview with Decrypt, Canary Capital CEO Steven McClurg suggested the NFT market could soon experience a revival, with chatter about funds tracking NFT prices potentially stoking investor interest in digital art collectibles. 

Although an NFT-backed ETF might have been unthinkable a few years ago, the likelihood that such a fund could become available to U.S. investors has increased as federal regulators embrace new, crypto-friendly regulations and as “more liquid” NFTs have come to market, McClurg told Decrypt. 

“Today’s SEC is more open to actively managed products, and more liquid ‘digital art’ has been created,” McClurg said. “Now that the major barriers have been removed, I…thought it was an opportunity to attempt an NFT-backed ETF.” 

The executive’s comments come just 10 days after Canary Capital filed to launch a Pudgy Penguins and PENGU ETF in the U.S.—a move that divided Crypto Twitter. 

Some members of the crypto community mocked the ETF filing, casting Canary Capital’s announcement as nothing more than fluff or fanfare designed to pump the Pudgy Penguins collection. 

Experts previously told Decrypt that putting NFTs into ETF wrappers could present structural and technical issues, with the relative illiquidity of NFTs also posing market-making problems. 

However, digital art proponents have expressed hope that an NFT-based ETF could revitalize the languishing NFT market. 

Last year, the NFT market slumped to a three-year low, with both sales and trading volumes slumping nearly 20% compared to the year prior, according to Web3 data provider DappRadar’s 2024 Industry report.  Meanwhile, popular NFT collections such as Pudgy Penguins, Crypto Punks and Milady Maker have lost 30%, 7% and 17% of their values in the past year, respectively, according to CoinGecko data.  

Despite that market downturn, McClurg is optimistic digital art is on a path toward wider adoption in the near future. 

“Now that the SEC determined digital art and collectibles to not be securities, I see the long-term trend in digital art and digital rights to those works,” McClurg said. “Major barriers have been removed.”

Edited by James Rubin