The U.S. Securities and Exchange Commission (SEC) has authorized exchange-traded funds (ETFs) for Bitcoin and Ethereum indexes from Franklin Templeton and Hashdex.
The SEC has approved the first spot ETFs that incorporate Bitcoin and Ethereum after several months of review. The Nasdaq Crypto Index US ETF of Hashdex was granted approval to trade on the Nasdaq Stock Market on December 19, and the Franklin Crypto Index ETF was cleared for the Cboe BZX Exchange.
Both exchange-traded funds (ETFs) will maintain positions in Bitcoin and Ether. The Franklin Crypto Index ETF will adhere to the Institutional Digital Asset Index, a benchmark that monitors the performance of digital assets such as Ether and Bitcoin. In the interim, the Nasdaq Crypto US Settlement Price Index will reflect the performance of Hashdex’s Crypto Index ETF in tracking Bitcoin and Ether.
Amended filings were the basis for the approvals. Previously approved spot Bitcoin and Ether ETP proposals under previous SEC rulings are closely resembling the trust structures and operational terms of both firms.
The agency determined that the proposals satisfied the Exchange Act’s criteria. This legislation mandates that issuers establish regulations that protect the public interest and investors, while also preventing fraud and manipulation.
Franklin Templeton asked the SEC to approve its crypto index ETF in August, but the deadline for a decision was November 20. In the interim, on November 25, asset manager Hashdex submitted its second amended ETF application. Prior to this, the SEC requested additional time to review the proposal, which resulted in an initial amendment in October.
According to a previous announcement, Hashdex’s multi-asset ETF will initially focus on Bitcoin and Ethereum, with the potential to expand to include Solana and Cardano in the future. The firm endeavors to mitigate the volatility that is typically associated with single-asset ETFs by diversifying the ETF’s holdings across multiple main digital assets.
In recent years, ETFs have become increasingly popular due to their ability to provide investors with a simple and regulated approach to diversifying their portfolios across a variety of assets.
Nate Geraci, president of The ETF Store, an investment advisory firm that specializes in ETFs, indicated in a post on X that the SEC’s approval could encourage other firms to follow suit.
Geraci wrote, “It will be intriguing to observe whether BlackRock or other entities attempt to capitalize on this and introduce comparable exchange-traded funds.”
Eric Balchunas, a senior ETF analyst at Bloomberg, recently predicted that both funds could arrive in January. The allocation of these ETFs is market-cap weighted, with approximately 80% of the assets allocated to Bitcoin and 20% to Ethereum, as he observed.
Balchunas and his colleague, Bloomberg ETF analyst James Seyffart, anticipate that the approval of Bitcoin and Ether funds may be followed shortly by the approval of ETFs that track other cryptocurrencies, such as Litecoin or Hedera.
The potential classification of Litecoin as a “commodity” is a possible outcome of its origins as a Bitcoin variant, which renders it a strong candidate for ETF approval. In contrast to other cryptocurrencies that are currently confronting regulatory challenges, Hedera has not been classified as a security by the SEC, which could potentially expedite its path to approval.
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