Amid a recent dip in the crypto market, the US Securities and Exchange Commission (SEC) has made a significant move by giving the green light to the first-ever hybrid Bitcoin (BTC) and Ethereum (ETH) index exchange-traded funds (ETFs) from Franklin Templeton and Hashdex. These innovative ETFs are set to launch in January 2025.
This landmark decision marks a pivotal moment in the investment sector, as for the first time, hybrid Bitcoin-Ethereum index ETFs will be available to investors. Hashdex’s Crypto Index ETF will trade on Nasdaq, while Franklin Templeton’s version will be listed on the Cboe BZX Exchange.
Both ETFs are designed to hold spot BTC and ETH, with a current allocation reflecting 80% Bitcoin and 20% Ethereum based on their market capitalizations. There is potential for expansion to include additional cryptocurrencies in the future, subject to regulatory approval.
The SEC noted that Franklin Templeton’s filing from December 18 received fast-tracked approval. In response to this development, Nate Geraci, President of The ETF Store, hinted at the growing interest in such products, stating, “It will be interesting to see if BlackRock or others attempt to piggyback on this and launch similar ETFs. Regardless, I expect there will be meaningful demand for these products.” His comments indicate a belief in the appetite for diversification in an emerging asset class like crypto.
Geraci also pointed out that the SEC’s decision likely stems from the similarities these crypto index ETFs share with previously approved spot Bitcoin and spot Ethereum ETFs, specifically regarding the trusts’ structure and operational terms. The SEC confirmed that both ETF proposals adhered to the criteria established by the Exchange Act, which mandates issuers to implement protective measures against fraud, manipulation, and investor risks.
In the details of the Crypto Index ETFs, Hashdex first revised its S-1 filing with the SEC in October and submitted a second amended application on November 25. Meanwhile, Franklin Templeton initiated its S-1 for the crypto index ETF in August.
Hashdex’s filings mentioned that other digital assets, including Avalanche (AVAX), Chainlink (LINK), and Litecoin (LTC), could potentially be integrated into the ETF in the future, pending regulatory approval. Franklin Templeton’s ETF also allows for the addition of other cryptocurrencies without specifying which ones.
A noteworthy aspect of these ETFs is their reliance on custodial services. Hashdex will utilize services from Coinbase, BitGo, Fidelity, and Gemini. Conversely, Franklin Templeton plans to employ BitGo and Coinbase as its main custodians.
The crypto ETF landscape is heating up, especially given the successful launches earlier in the year. Some experts speculate that US-based crypto spot ETFs could soon surpass spot gold ETFs in total net assets. As of now, the total assets under management within Bitcoin ETFs have crossed $115 billion.
This positive momentum is not limited to the US alone; other countries are gradually embracing the concept of regulated crypto ETFs. Currently, Bitcoin trades at $95,824, reflecting a 4.8% decline over the past 24 hours.
The approval of these hybrid ETFs is encouraging news for both seasoned investors and newcomers alike, opening new avenues in the crypto investment space and making the market more accessible to a broader audience.
