Nasdaq's Proposal to SEC: Regulating Ethereum ETF Like Commodity Funds

Introduction:

Nasdaq has submitted a proposal to the SEC, seeking permission to oversee BlackRock's Ethereum exchange-traded fund (ETF) under the same regulations applied to commodity-based funds. This move follows the SEC's recent approval of Ethereum-based futures ETFs in October. Nasdaq aims to establish the iShares Ethereum Trust under its Nasdaq Rule 5711(d), which governs the listing and trading of commodity-based Trust shares.

Uniformity in Digital and Traditional Asset Regulation:

Nasdaq advocates for consistent regulations governing both digital and traditional assets. It suggests that both Bitcoin (BTC) and Ethereum (ETH) should be classified as commodities, aligning the rules for spot ETFs of these digital assets with those governing gold ETFs. These arguments are akin to those presented in spot Bitcoin ETF applications. Nasdaq contends that the SEC should permit spot Bitcoin or Ethereum-based ETFs, as it already allows the CME to host futures-based ETFs for these assets.

Ensuring Investor Safety:

Nasdaq assures that it meets all regulatory requirements to protect investors, including having a surveillance agreement in place to monitor market fraud and manipulation. It highlights its membership in the Intermarket Surveillance Group (ISG) and its partnership with Coinbase, both of which contribute to investor protection. Nasdaq asserts that market surveillance for spot Bitcoin or Ethereum is as robust as that for futures markets and aligns with SEC criteria.

ETF Details:

The proposed iShares Ethereum Trust will operate under a trust agreement between iShares Delaware Trust Sponsor and BlackRock Fund Advisors. Coinbase Custody Trust Company will serve as the Ether Custodian, storing most of the ETH securely. The ETF's net asset value (NAV) calculation may not follow U.S. GAAP, with iShares Delaware Trust Sponsor determining the NAV. Valuation will rely on the CME CF Ether-Dollar Reference Rate for pricing, calculated daily based on Ether-USD trading across major spot platforms.