SEC Greenlights First Hybrid Bitcoin And Ethereum ETFs From Franklin Templeton, Hashdex

Amid yesterday’s crypto market slump, the US Securities and Exchange Commission (SEC) approved the first-ever dual Bitcoin (BTC) and Ethereum (ETH) index exchange-traded funds (ETFs) from Franklin Templeton and Hashdex. The ETFs are scheduled for launch in January 2025.

SEC Approves First Dual Bitcoin-Ethereum Index ETFs

For the first time, the US financial regulator has approved hybrid Bitcoin-Ethereum index ETFs. Hashdex’s Crypto Index ETF will trade on Nasdaq, while Franklin Templeton’s Crypto Index ETF will be listed on the Cboe BZX Exchange.

Both ETFs will hold spot BTC and ETH in proportions reflecting their respective market capitalizations, currently resulting in an 80:20 ratio favoring Bitcoin. However, the ETFs may expand to include other cryptocurrencies in the future, pending regulatory approval.

The SEC highlighted that Franklin Templeton’s December 18 filing received expedited approval. Commenting on the development, Nate Geraci, President of The ETF Store, said:

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. Advisors love diversification. Especially in an emerging asset class such as crypto.

Geraci emphasized the potential rationale behind the SEC’s decision to approve the crypto index ETFs, pointing to their similarities with the previously approved spot Bitcoin and spot Ethereum ETFs in terms of the trusts’ structure and the operation terms.

The SEC added that proposals for both the ETFs aligned with the criteria set forth by the Exchange Act. For the uninitiated, the Exchange Act requires issuers to implement safeguards against fraud, manipulation, and risks to investors.

Details About The Crypto Index ETFs

Asset manager Hashdex first amended its S-1 filing with the SEC in October, and submitted a second amended application on November 25. Franklin Templeton filed its S-1 for the crypto index ETF in August.

In Hashdex’s November filing, the company stated that other digital assets, such as Avalanche (AVAX), Chainlink (LINK), and Litecoin (LTC), may meet its eligibility criteria and could be added to the ETF in the future with regulatory approval. Franklin Templeton’s ETF also leaves room to add other cryptocurrencies, but did not specify any by name.

Notably, Hashdex’s ETF will rely on custodial services from Coinbase, BitGo, Fidelity, and Gemini. Similarly, Franklin Templeton’s ETF will use BitGo and Coinbase as its primary custodians.

The crypto ETF space is becoming increasingly competitive, thanks to their resounding success since their launch earlier this year. Experts opine that US-based crypto spot ETFs may soon overtake spot gold ETFs in terms of net assets held.

Following the US, other countries in the world are also steadily warming up to the idea of regulated crypto ETFs. At press time, BTC trades at $95,824, down 4.8% in the past 24 hours.