Prepare a small square pan (8 x 8 or similar size) pan by lining it with parchment paper (or aluminum foil) and coating it with cooking spray.
Crush candy canes by placing them in a sealed plastic bag and hitting them gently with a rolling pin.
Combine white baking chips, sweetened condensed milk, and butter in a microwave-safe bowl. Microwave in 30-second bursts, stirring each time, until melted. It should take 2 to 3 minutes. Do not overcook.
Stir to ensure all the white chocolate mixture is melted, then add vanilla. Stir until smooth.
Pour the white fudge mixture into the prepared pan and smooth it evenly. Sprinkle 1/2 of the candy canes on top (finely crushed portion). This layer will be the bottom when flipped over.
Cover the fudge with plastic wrap, place in the refrigerator, and allow to set for 2 hours.
Lift the fudge from the baking dish by pulling up the parchment paper. Place on a cutting board upside down and cut into squares of desired size. (This will make 16 - 32 squares)
Sprinkle remaining crushed Candy Canes on top of vanilla fudge, and serve at room temperature. Enjoy!