Key Determinants of the Next Spot ETF
Under more relaxed laws and regulations, we believe the two key factors that will determine the next spot ETF are decentralization and potential demand. In terms of the former, whether FIT21 bypasses the Howey test by creating a new digital asset class with a key decentralization test, or the SEC's suggestion that "sufficient decentralization" may affect securities classification, the degree of decentralization may be the key to whether a digital asset can get an ETF. In terms of the latter, the potential demand for any new ETF is equally important as it will be the largest factor affecting profitability. Here, issuers may weigh reputational risks, the ability to pass various internal committees, and the best interests of their customers while considering potential demand. Overall, while crypto-native issuers may apply for a large number of spot ETFs, we believe larger issuers are more likely to focus on one or two digital assets with sufficient decentralization and high potential demand.
