SecProbe.io

CORRESP
1
filename1.htm

September
22, 2025

Via
EDGAR Correspondence

United
States Securities and Exchange Commission

Division of Corporation Finance

Office of Crypto Assets

100
F Street, N.E.

Washington, D.C. 20549

 Re: Canary
                                         HBAR ETF

File
No. 333-283135

Dear
Mr. Brunhofer, Mr. Telewicz, Ms. Paik and Ms. Berkheimer:

This
letter responds to your comments regarding Amendment No. 1 to the registration statement filed on Form S-1 for Canary
HBAR ETF (the “Trust”) with the Staff of the Securities and Exchange Commission (the “Staff”)
on February 21, 2025 (the “Registration Statement”). Capitalized terms used herein, but not otherwise defined,
have the meanings ascribed to them in the Registration Statement.

Comment
1 – General

To
the extent that you intend to use a fact sheet, please provide the Staff with a copy for the Staff’s review.

Response
to Comment 1

The
Trust has no current intention to use a fact sheet. To the extent the Trust decides to use a fact sheet prior to the effectiveness
of the Registration Statement, a copy of the fact sheet will be provided to the Staff under separate cover.

Comment
2 – General

Please
disclose whether and to what extent the Trust has plans to stake its HBAR.

Response
to Comment 2

The
Trust has no current intention to stake it HBAR. The Registration Statement has been updated to disclose this fact.

Comment
3 – Table of Contents

Please
revise the Table of Contents to include a specific reference to the Risk Factors section. Please refer to Item 502(a) of Regulation
S-K. In addition, please revise to include a “Risk Factors” heading at the beginning of the Risk Factors section.

Response
to Comment 3

The
Registration Statement has been updated in accordance with the Staff’s comment.

Comment
4 – Prospectus Summary

Please
revise your prospectus summary to disclose, if true, that:

 ● The
                                         Trust is a passive investment vehicle that does not seek to generate returns beyond tracking
                                         the price of HBAR; and

 ● The
                                         amount of HBAR represented by a Share will decline over time due to the transfer of the
                                         Trust’s HBAR to pay the Sponsor Fee and other liabilities, regardless of whether
                                         the trading prices of Shares rise or fall. In this regard, the Staff notes your disclosure
                                         on page 41 that the amount of HBAR represented by the Shares will decline over time.

Response
to Comment 4

The
Registration Statement has been updated in accordance with the Staff’s comment.

Comment
5 – Overview of the Trust

The
Staff notes your disclosure that “Except in limited circumstances, Shareholders will have no voting rights under the Trust
Agreement.” Please revise your disclosure to disclose the “limited circumstances” under which shareholders have
voting rights under the Trust Agreement.

Response
to Comment 5

The
disclosure referenced in the comment has been replaced with the following:

Except
for the limited circumstances where the Shareholders may vote on a replacement sponsor in the event of the Sponsor’s withdrawal,
Shareholders will have no voting rights under the Trust Agreement.

Comment
6 – HBAR and the Hedera Network

The
Staff notes your disclosure that the Hedera Network was built on the hashgraph distributed consensus algorithm, invented by Dr.
Leemon Baird and subsequently patented by Swirlds, Inc. Please revise to disclose the connection between Dr. Leemon Baird and
Swirlds, Inc. as well as the involvement of Mance Harmon.

Response
to Comment 6

The
disclosure referenced in the comments has been replaced with the following:

The
Hedera Network is built on the hashgraph distributed consensus algorithm, invented by Dr. Leemon Baird and subsequently patented
by Swirlds, Inc. in 2016. Dr. Baird co-founded both Swirlds and Hedera, and Mance Harmon, a co-founder and executive of Hedera,
also co-founded Swirlds. Swirlds has granted to Hedera an exclusive, non-transferable, perpetual license to use the hashgraph
technology solely for operating the Hedera Network. Because Dr. Baird and Mr. Harmon have affiliations with and may hold interests
in both Hedera and Swirlds, their involvement could present potential conflicts of interest with respect to the license and other
arrangements between Hedera and Swirlds.

Comment
7 – HBAR and the Hedera Network

Please
revise to provide additional disclosure about the nature and number of decentralized applications developed on the network as
well as active developers. To the extent there is a risk that the ecosystem will not attract more developers, users, and applications,
please consider disclosing this risk and its impacts.

Response
to Comment 7

The
referenced disclosure has been revised in accordance with the Staff’s comment.

Comment
8 – Custody of the Trust’s Assets

The
Staff notes your disclosure that the “Custodians provide insured safekeeping of digital assets.” Please revise your
disclosure to clarify the extent to which the Custodians provide insurance. In this regard, the Staff notes that the insurance
policies held by Coinbase Custodian and BitGo are shared among all their clients and are not specific to the Trust or to customers
holding HBAR.

Response
to Comment 8

The
disclosure regarding each of BitGo and Coinbase has been revised to state that the insurance carried by the applicable Custodian
is shared among all of Custodian’s customers and is not specific to the Trust or to customers holding HBAR with the Custodian
and may not be available or sufficient to protect the Trust from all possible losses or sources of losses.

Comment
9 – Plan of Distribution

The
Staff notes your disclosure here and similar disclosure on page 37 that the Trust will only facilitate the creation and redemption
of shares in exchange for cash and that if the Trust were to create or redeem shares in exchange for HBAR, the Trust would first
need to seek certain regulatory approvals. Please revise your disclosure as appropriate to reconcile these statements with your
disclosure elsewhere that creation and redemption orders may be denominated and settled in an amount of HBAR or cash.

Response
to Comment 9

As
a result of the generic listing standards adopted by the Exchange, the Trust no longer will need to seek separate regulatory approval
to facilitate the creation and redemption of Shares in king. Accordingly, the applicable disclosure has been revised throughout.

Comment
10 – HBAR, HBAR Markets and Regulation of HBAR – Hashgraph Distributed Consensus

Please
expand your disclosure regarding the hashgraph distributed consensus algorithm, including by disclosing:

 ● The
                                         number of consensus nodes in the Hedera Network;

 ● That
                                         all consensus nodes are operated by the Hedera Council;

 ● The
                                         rewards provided to each category of network participant for their contributions to or
                                         participation on the Hedera Network;

 ● The
                                         fees involved in executing a transaction on the Hedera Network and how they are calculated;
                                         and

 ● How
                                         staking works on the Hedera Network.

Response
to Comment 10

The
disclosure referenced by the Staff’s comment has been revised as follows:

Hashgraph
Distributed Consensus

The
Hedera Network is built on the hashgraph distributed consensus algorithm, invented by Dr. Leemon Baird and patented by Swirlds,
Inc. in 2016. Swirlds has granted to Hedera an exclusive, non-transferable, perpetual license to use hashgraph technology
for the sole purpose of operating the Hedera Network. The hashgraph data structure and consensus algorithm provide a novel platform
for distributed consensus.

One
central difference between hashgraphs and blockchains is how they add transactions to their respective distributed ledgers. On
a blockchain, blocks of transactions are appended sequentially; simultaneous block production can cause temporary forks, after
which the network converges on the longest chain. Hashgraph also batches transactions, but unlike many blockchains, all hashgraph
“events” are incorporated into the ledger—none are discarded—forming a Directed Acyclic Graph (DAG). DAGs
can reduce data size per transaction, lowering costs, increasing speed, and improving scalability.

To
achieve consensus on transaction ordering, hashgraph computes a fair order in a decentralized environment, limiting the ability
of individuals or small groups to manipulate ordering. It uses “gossip about gossip” and virtual voting: nodes randomly
gossip the information they hold; each sync creates an “event” containing a timestamp, transactions, hashes of parent
events, and a signature. Through virtual voting, nodes determine consensus timestamps and order without centralized leaders.

As
of October 2024, the Hedera mainnet operates 30 consensus nodes, all of which are operated by members of the Hedera Governing
Council or their designated affiliates. Community-run mirror nodes provide scalable, read-only access to network data but do not
participate in consensus.

HBAR
is the Hedera Network’s native cryptocurrency, used both to pay fees and to secure the network through stake-weighted consensus.
Each transaction fee on the network is composed of three components that reflect measured resource usage: a node fee, which compensates
the submitting (access) node for API handling and gossip; a network fee, which compensates consensus nodes for bandwidth, storage,
and computation needed to reach consensus; and a service fee, which covers execution and storage for the specific service, such
as crypto transfers, token operations, smart contracts, or Consensus Service messages. Fees are defined by a published schedule
denominated in USD. The network estimates resource usage for the transaction type, prices those resources according to the schedule,
sums the node, network, and service fees, and then converts the USD amount to HBAR at the current exchange rate at the time of
submission. Certain entities, such as tokens, topics, files, and contracts, may also incur ongoing storage or auto-renewal fees
based on bytes stored and the chosen renewal period. Typical simple transaction fees are fractions of a US cent, while creation
or storage-heavy operations cost more. Fee schedules are subject to governance updates.

Rewards
are provided to different categories of network participants. Consensus node operators, who are members of the Hedera Council,
receive node fees for transactions they submit and a share of network fees as determined by governance. Their influence in virtual
voting is proportional to their stake. Proxy stakers, meaning HBAR holders who stake to a node, receive staking rewards in HBAR
from the network’s staking reward fund. These rewards are proportional to their stake weight on the chosen node and the
node’s eligibility, subject to network parameters. There is no slashing. Mirror node operators, application developers,
and end-users do not receive protocol-level rewards, though they may receive ecosystem grants or incentives outside the consensus
protocol from time to time.

Any
HBAR account may stake its balance to a consensus node (proxy stake). HBAR remains liquid, with no lock-up, bonding, or slashing.
Stake weight contributes to the node’s consensus weight up to a configurable maximum stake cap per node. Rewards accrue
by staking period, which is daily, and are calculated from a governance-controlled reward rate and the total stake distribution.
Rewards are paid in HBAR and typically materialize to an account upon a balance change after the close of a staking period. Unstaking
or changing a staked node takes effect at the next staking period boundary according to network rules.

Security
and finality Gossip speed is independent of which node submitted a transaction and cannot be accelerated by paying higher fees.
With no leaders in consensus, no small subset of nodes can unduly influence ordering, supporting asynchronous Byzantine Fault
Tolerance (aBFT). Transactions propagate and reach final consensus in seconds. Applications may submit the same transaction to
multiple nodes; only the first to reach consensus is accepted, and duplicates are ignored.

Comment
11 – HBAR, HBAR Markets and Regulation of HBAR – Hedera Governing Council

Please
address the following regarding the Hedera Governing Council:

 ● Please
                                         disclose the number of global organizations that make up the Hedera Council as well as
                                         the identities of the material global organizations that make up the Hedera Council.
                                         Please also disclose existing and potential conflicts of interest that could arise due
                                         to the identity of the members of the Hedera Council, and provide risk factor disclosure,
                                         to the extent appropriate.

 ● Please
                                         expand your disclosure to provide additional detail about the governance mechanism of
                                         the Hedera Council, including a description of the board of directors, committees, and
                                         the officers of the organization, and provide more specific risk factor disclosure regarding
                                         the decision-making concentration on the Hedera Network.

 ● The
                                         Staff notes your disclosure that Hedera Council membership does not confer any economic
                                         interest in Hedera. Please revise to clarify whether there are any economic incentives
                                         for Hedera Council membership, including the rewards from hosting and maintaining a node
                                         on the Hedera Network.

Response
to Comment 11

The
disclosure referenced by the Staff’s comment has been revised as follows:

Hedera
Governing Council

The
Hedera Network is governed by the Hedera Governing Council (“Hedera Council”), a rotating group of global organizations
that span multiple industries and geographies. The Council consists of up to 39 members. As of September 2025, the Hedera Council is composed
of 31 organizations. Material members include: Aberdeen, Australian Payments Plus, Arrow, Bitgo, Blockchain for Energy, Chainlink Labs, Dell, Deutsche Telkom, DLA Piper, Google, Hitachi, IBM, LG, Nomura,
Nairobi Securities Exchange, Shinhan Bank, Standard Bank, and Ubisoft.
The primary responsibilities of Hedera Council members are to: (i) participate in the governance of the Hedera Network; and (ii)
host and maintain a node on the Hedera Network. Hedera Council members contribute their expertise and experience in deliberations
and decision-making relating to software updates, Hedera Treasury management, network pricing, regulatory compliance, membership,
and other key governance matters.

Each
Hedera Council member holds an equal ownership interest in the Hedera Network and has equal voting rights on governance matters.
The Hedera Council membership does not confer any economic interest in Hedera, such as rights to dividends or a share of profits.
Other than Swirlds, Inc. (which has a permanent Hedera Council seat), each Hedera Council member is term-limited to two consecutive
three-year terms, and members rotate on and off the Hedera Council.

The
Hedera Council operates through a governance framework that includes a board (comprised of representatives of membe