SEC Filing Document

Company: Canary Staked TRX ETF
Ticker: 
CIK: 2064768
Filing Type: S-1
Document Type: S-1
Date Filed: 2025-04-18
Accession Number: 0001999371-25-004423
Exchange: 
SIC Code: 6221
SIC Description: Commodity Contracts Brokers & Dealers
URL: https://www.sec.gov/Archives/edgar/data/2064768/000199937125004423/canary-s1_041825.htm

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Mining Activity, Digital Wallets, The Provision Of Services Related To Trading And Custodying TRX, The Operation Of The Tron Network, Or The Digital Asset Markets Generally. There is a lack of consensus regarding the regulation of digital assets, including TRX, and their markets. As a result of the growth in the size of the digital asset market, as well as the 2022 Events, the U.S. Congress and a number of U.S. federal and state agencies (including FinCEN, SEC, OCC, CFTC, FINRA, the Consumer Financial Protection Bureau (“CFPB”), the Department of Justice, the Department of Homeland Security, the Federal Bureau of Investigation, the IRS, state financial institution regulators, and others) have been examining the operations of digital asset networks, digital asset users and the digital asset markets. Many of these state and federal agencies have brought enforcement actions or issued consumer advisories regarding the risks posed by digital assets to investors.

Ongoing and future
regulatory actions with respect to digital assets generally or TRX in particular may alter, perhaps to a materially adverse extent, the
nature of an investment in the Shares or the ability of the Trust to continue to operate.

The 2022 Events,
including among others the bankruptcy filings of FTX and its subsidiaries, Three Arrows Capital, Celsius Network, Voyager Digital, Genesis,
BlockFi and others, and other developments in the digital asset markets, have resulted in calls for heightened scrutiny and regulation
of the digital asset industry, with a specific focus on intermediaries such as digital asset exchanges, platforms, and custodians. Federal
and state legislatures and regulatory agencies may introduce and enact new laws and regulations to regulate crypto asset intermediaries,
such as digital asset exchanges and custodians. The March 2023 collapses of Silicon Valley Bank, Silvergate Bank, and Signature Bank,
which in some cases provided services to the digital assets industry, may amplify and/or accelerate these trends. On January 3, 2023,
the federal banking agencies issued a joint statement on crypto-asset risks to banking organizations following events which exposed vulnerabilities
in the crypto-asset sector, including the risk of fraud and scams, legal uncertainties, significant volatility, and contagion risk. Although
banking organizations are not prohibited from crypto-asset related activities, the agencies have expressed significant safety and soundness
concerns with business models that are concentrated in crypto-asset related activities or have concentrated exposures to the crypto-asset
sector.

US federal and state
regulators, as well as the White House, have issued reports and releases concerning crypto assets, including TRX and crypto asset markets.
Further, in 2023 the House of Representatives formed two new subcommittees: the Digital Assets, Financial Technology and Inclusion Subcommittee
and the Commodity Markets, Digital Assets, and Rural Development Subcommittee, each of which were formed in part to analyze issues concerning
crypto assets and demonstrate a legislative intent to develop and consider the adoption of federal legislation designed to address the
perceived need for regulation of and concerns surrounding the crypto industry. However, the extent and content of any forthcoming laws
and regulations are not yet ascertainable with certainty, and it may not be ascertainable in the near future. A divided Congress makes
any prediction difficult. We cannot predict how these and other related events will affect us or the crypto asset business.

In August 2021,
the chair of the SEC stated that he believed investors using digital asset trading platforms are not adequately protected, and that activities
on the platforms can implicate the securities laws, commodities laws and banking laws, raising a number of issues related to protecting
investors and consumers, guarding against illicit activity, and ensuring financial stability. The chair expressed a need for the SEC to
have additional authorities to prevent transactions, products, and platforms from “falling between regulatory cracks,” as
well as for more resources to protect investors in “this growing and volatile sector.” The chair called for federal legislation
centering on digital asset trading, lending, and decentralized finance platforms, seeking “additional plenary authority” to
write rules for digital asset trading and lending. Moreover, President Biden’s March 9, 2022 Executive Order, asserting that technological
advances and the rapid growth of the digital asset markets “necessitate an evaluation and alignment of the United States Government
approach to digital assets,” signals an ongoing focus on digital asset policy and regulation in the United States. A number of reports
issued pursuant to the Executive Order have focused on various risks related to the digital asset ecosystem, and have recommended additional
legislation and regulatory oversight. There have also been several bills introduced in Congress that propose to establish additional regulation
and oversight of the digital asset markets.

It is not possible
to predict whether Congress will grant additional authorities to the SEC or other regulators, what the nature of such additional authorities
might be, how they might impact the ability of digital asset markets to function or how any new regulations that may flow from such authorities
might impact the value of digital assets generally and TRX held by the Trust specifically. The consequences of increased federal regulation
of digital assets and digital asset activities could have a material adverse effect on the Trust and the Shares.

FinCEN
requires any administrator or exchanger of convertible digital assets to register with FinCEN as a money transmitter and comply with
the anti-money laundering regulations applicable to money transmitters. Entities which fail to comply with such regulations are
subject to fines, may be required to cease operations, and could have potential criminal liability. For example, in 2015, FinCEN
assessed a $700,000 fine against a sponsor of a digital asset for violating several requirements of the Bank Secrecy Act by acting
as an MSB and selling the digital asset without registering with FinCEN, and by failing to implement and maintain an adequate
anti-money laundering program. In 2017, FinCEN assessed a $110 million fine against BTC-e, a now defunct digital asset exchange, for
similar violations. The requirement that exchangers that do business in the U.S. register with FinCEN and comply with anti-money
laundering regulations may increase the cost of buying and selling TRX and therefore may adversely affect the price of TRX and an
investment in the Shares.

The Office of Foreign
Assets Control (“OFAC”) of the U.S. Department of the Treasury (the “U.S. Treasury Department”) has added digital
currency addresses to the list of Specially Designated Nationals whose assets are blocked, and with whom U.S. persons are generally prohibited
from dealing. Such actions by OFAC, or by similar organizations in other jurisdictions, may introduce uncertainty in the market as to
whether TRX that has been associated with such addresses in the past can be easily sold. This “tainted” TRX may trade at a
substantial discount to untainted TRX. Reduced fungibility in the TRX markets may reduce the liquidity of TRX and therefore adversely
affect their price.

In February 2020,
then-U.S. Treasury Secretary Steven Mnuchin stated that digital assets were a “crucial area” on which the U.S. Treasury Department
has spent significant time. Secretary Mnuchin announced that the U.S. Treasury Department is preparing significant new regulations governing
digital asset activities to address concerns regarding the potential use for facilitating money laundering and other illicit activities.
In December 2020, FinCEN, a bureau within the U.S. Treasury Department, proposed a rule that would require financial institutions to submit
reports, keep records, and verify the identity of customers for certain transactions to or from so-called “unhosted” wallets,
also commonly referred to as self-hosted wallets. In January 2021, U.S. Treasury Secretary nominee Janet Yellen stated her belief that
regulators should “look closely at how to encourage the use of digital assets for legitimate activities while curtailing their use
for malign and illegal activities.”

Under regulations
from the New York State Department of Financial Services (“NYDFS”), businesses involved in digital asset business activity
for third parties in or involving New York, excluding merchants and consumers, must apply for a license, commonly known as a BitLicense,
from the NYDFS and must comply with anti-money laundering, cyber security, consumer protection, and financial and reporting requirements,
among others. As an alternative to a BitLicense, a firm can apply for a charter to become a limited purpose trust company under New York
law qualified to engage in certain digital asset business activities. Other states have considered or approved digital asset business
activity statutes or rules, passing, for example, regulations or guidance indicating that certain digital asset business activities constitute
money transmission requiring licensure.

The inconsistency
in applying money transmitting licensure requirements to certain businesses may make it more difficult for these businesses to provide
services, which may affect consumer adoption of TRX and its price. In an attempt to address these issues, the Uniform Law Commission passed
a model law in July 2017, the Uniform Regulation of Virtual Currency Businesses Act, which has many similarities to the BitLicense and
features a multistate reciprocity licensure feature, wherein a business licensed in one state could apply for accelerated licensure procedures
in other states. It is still unclear, however, how many states, if any, will adopt some or all of the model legislation.