The U.S. Securities and Exchange Commission (SEC) has granted approval for two spot cryptocurrency index exchange-traded funds (ETFs), marking a significant milestone in the evolution of crypto investment products.
On December 18, the SEC gave the green light to Franklin Templeton’s crypto index ETF, allowing it to be traded on the Cboe BZX Exchange. The very next day, the commission also approved Hashdex’s crypto index ETF, which will be listed on the Nasdaq stock market.
Franklin Templeton’s Fast-Track Approval
Franklin Templeton’s crypto ETF received “accelerated approval” after the firm updated its filing to meet regulatory requirements. The SEC deemed the proposal “substantially similar” to previous approvals for spot Bitcoin and Ether ETFs, which paved the way for a quicker approval process.
The Role of Crypto Index ETFs
Crypto index ETFs provide a diversified investment vehicle that tracks the performance of multiple cryptocurrencies. By holding a basket of assets in similar proportions to a given index, these ETFs aim to mirror the performance of the broader digital asset market. The products from both Franklin Templeton and Hashdex focus primarily on the performance of spot Bitcoin and Ether.
Franklin Templeton’s ETF will track the Institutional Digital Asset Index, while Hashdex’s product will follow the Nasdaq Crypto US Settlement Price Index. Both indices are heavily weighted toward Bitcoin and Ether, reflecting the dominant positions of these two cryptocurrencies in the market.
Filing Timelines and Revisions
Franklin Templeton submitted its filing for the Franklin Crypto Index ETF in August. Hashdex, on the other hand, initially filed its S-1 in June but later revised its application on November 25. Both firms made adjustments to address SEC concerns, particularly around market integrity and investor protection. The SEC’s December 19 notice confirmed that these revised filings met the necessary regulatory standards, ensuring they were designed to prevent fraud and manipulation.
What’s Next for Crypto ETFs?
With both ETFs approved, industry experts are optimistic about their imminent launch. Bloomberg analyst Eric Balchunas predicts that both funds will likely debut in January, with Bitcoin expected to make up around 80% of the portfolios, while Ether will account for roughly 20%.
The approval of these crypto index ETFs is expected to spark further interest in similar products. Nate Geraci, President of the ETF Store, anticipates “meaningful demand” for crypto ETFs, as financial advisors increasingly seek diversified digital asset exposure for their clients. The trend could lead to more issuers filing proposals with the SEC in the coming months.
Bitwise’s Spot Bitcoin and Ether ETP
In addition to Franklin Templeton and Hashdex, other firms are eyeing similar products. Last month, Bitwise filed a proposal with the SEC to launch a spot Bitcoin and Ether exchange-traded product (ETP) on the NYSE Arca. This product aims to offer investors balanced exposure to Bitcoin and Ether in an easily accessible format.
Leadership Changes at the SEC
The approval of these crypto products comes at a time of notable changes within the SEC. Chair Gary Gensler has announced he will step down on January 20, 2025, the same day that President-elect Donald Trump is set to take office. These leadership changes could have implications for the regulatory landscape around crypto products in the future.
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