PENGU ETF: A New Frontier in Digital Asset Investment

A PENGU ETF application is here, but it’s not your usual crypto fund. This fund would hold NFTs, specifically Pudgy Penguins NFTs, as well as PENGU tokens. If this gets the green light, it could flip how people invest in digital assets. What’s the catch? What’s next? Are NFT ETFs the next big thing? Here’s everything you need to know.

In this guide:

• What is PENGU ETF?
• Who is behind the PENGU ETF?
• How is the PENGU NFT structured?
• Why is the PENGU ETF a big deal?
• How might PENGU ETF work?
• Will PENGU ETF get listed?
• How PENGU ETF compares to traditional art funds
• The future of PENGU ETF and NFT-backed ETFs

What is PENGU ETF?

A PENGU ETF is exactly what it sounds like — an exchange-traded fund (ETF) that holds both PENGU tokens and Pudgy Penguins NFTs. This isn’t just another NFT-backed ETF that plays it safe with indirect exposure. Instead, it would hold NFTs inside the fund.

Who is behind the PENGU ETF?

Canary Capital is a digital asset investment firm behind the PENGU ETF. The firm is known for pushing crypto and NFT financial products into regulated markets, focusing on bridging on-chain assets with TradFi.

How is the PENGU NFT structured?

80-95% of the fund is allocated to PENGU tokens, the native token of the Pudgy Penguins ecosystem. Additionally, 5-15% is directly invested in Pudgy Penguins NFTs, making this the first ETF to truly integrate NFTs into TradFi. There’s more; this ETF also uses Ethereum (ETH) and Solana (SOL) to facilitate transactions inside the fund.

Why is the PENGU ETF a big deal?

So why are crypto communities alive with chatter about the PENGU ETF? Well, as we’ve alluded to above, NFTs have never been inside an ETF before. Traditional NFT-backed ETFs usually just hold companies related to NFTs or tokens that represent NFT markets. This PENGU ETF flips the script with real, on-chain, cold-storage NFT ownership wrapped in a regulated TradFi product.

Despite the concept being relatively groundbreaking, much of the commentary around the announcement has been tinged with skepticism. Many have questioned whether there is enough demand for such an investment vehicle — does anyone truly want a PENGU ETF?

How might PENGU ETF work?

We don’t know exactly how PENGU ETF will function because this has never been done before. However, based on how crypto ETFs and traditional art funds operate, here’s a realistic scenario.

Unlike traditional ETFs, where assets are liquid, NFTs are trickier to trade. To counter this, PENGU ETF mentions holding Ethereum (ETH) and Solana (SOL) as reserves to maintain liquidity.

Investors wouldn’t be buying NFTs directly but rather ETF shares that reflect the fund’s PENGU tokens + Pudgy Penguins NFT holdings.

Will PENGU ETF get listed?

Just because Canary Capital filed for PENGU ETF doesn’t mean it’s getting listed tomorrow. The SEC has never approved an NFT-driven ETF, and that’s the biggest hurdle. Unlike Bitcoin ETFs, where pricing and liquidity are well-established, NFTs are unique, illiquid, and harder to value.

The SEC will question whether the fund can accurately price its Pudgy Penguins NFTs and ensure investors have a fair exit strategy. There’s also the custody question; securing NFTs isn’t the same as holding Bitcoin or stocks. That said, the SEC has started warming up to digital assets, approving spot Bitcoin ETFs in 2024 after years of resistance.

How PENGU ETF compares to traditional art funds

Traditional art funds like Masterworks, The Fine Art Fund Group, and ArtVest Partners have been offering investors exposure to fine art for years, but they don’t actually hold NFTs or even digital assets.

Instead, they buy and store physical paintings from artists like Banksy, Basquiat, and Picasso, then sell shares of the fund to investors.

PENGU ETF is fundamentally different. As we’ve already explained, it directly holds Pudgy Penguins NFTs, making it the first attempt at putting real NFTs inside a regulated financial product.

The future of PENGU ETF and NFT-backed ETFs

Whether PENGU ETF gets approved or not, one thing is clear: this is just the beginning. NFT-backed ETFs are pushing digital collectibles into regulated finance, and if this works, we could see more funds holding Bored Apes, CryptoPunks, or even tokenized real-world assets (RWAs). BAYC ETF, anyone? Canary Capital might be the first to try, but they almost certainly won’t be the last.