SEC Approves Hashdex and Franklin Templeton’s Bitcoin-Ether ETFs, Marking a Milestone for Crypto Investment

In a significant development for the cryptocurrency investment landscape, the U.S. Securities and Exchange Commission (SEC) has approved two major Bitcoin-Ether exchange-traded funds (ETFs), marking a key moment for institutional crypto products. The SEC's approval, announced on December 19, grants approval to Hashdex’s Nasdaq Crypto Index US ETF and Franklin Templeton’s Crypto Index ETF—two ETFs that will offer investors exposure to spot Bitcoin (BTC) and spot Ether (ETH).

Key Features of the Approved ETFs

The Hashdex Nasdaq Crypto Index US ETF will be listed on the Nasdaq Stock Market, while the Franklin Crypto Index ETF will trade on the Cboe BZX Exchange. Both funds will track the performance of spot Bitcoin and spot Ether, offering a diversified investment vehicle for those looking to gain exposure to these leading cryptocurrencies.

The Franklin Crypto Index ETF will follow the Institutional Digital Asset Index, designed to reflect the performance of key digital assets, including Bitcoin and Ether. The Hashdex Crypto Index ETF, on the other hand, will track the Nasdaq Crypto US Settlement Price Index, which includes Bitcoin and Ether.

SEC’s Accelerated Approval Process

The SEC’s approval of these ETFs comes after the companies made amendments to their filings, ensuring that the Trusts’ structure and operational terms align closely with previous spot Bitcoin and Ether exchange-traded products (ETPs) that the SEC had approved in earlier rulings.

The commission noted that the filings met the requirements of the Exchange Act, which mandates that issuers have safeguards in place to prevent fraudulent and manipulative acts while ensuring the protection of investors and the broader public interest. Franklin Templeton’s updated filing was specifically approved on an “accelerated basis” on December 18.

Industry Reactions and Expectations

Industry observers have hailed the approval of these crypto ETFs as a significant step forward in the mainstream adoption of cryptocurrency. Nate Geraci, president of The ETF Store, a firm specializing in ETF investments, speculated that the approval could set a precedent, encouraging other major players in the financial world, such as BlackRock, to follow suit. In a post on X (formerly Twitter), Geraci said, "Will be interesting to see if BlackRock or others attempt to piggyback on this & launch similar ETFs," adding, "Advisers LOVE diversification. Especially in an emerging asset class such as crypto."

Despite this optimism, it remains to be seen how other firms will react to this regulatory breakthrough. The approval of Hashdex and Franklin Templeton’s ETFs may inspire other asset managers to develop similar products in response to growing demand for crypto-related investment opportunities.

Timeline and Regulatory Context

The approval process for these ETFs has been long and complex. In August 2023, Franklin Templeton applied to the SEC for approval, but the SEC delayed its decision in November 2023. Similarly, Hashdex submitted its second amended application for approval on November 25, following a request from the SEC for more time to evaluate its original proposal.

The timing of these approvals marks a pivotal moment in the evolution of cryptocurrency investment products in the United States. Both funds come at a time when institutional interest in cryptocurrency is intensifying, despite the SEC’s historically cautious approach to crypto-related financial products.

Other Firms Eyeing Crypto ETFs

While Hashdex and Franklin Templeton have secured approvals, they are not the only firms pushing to launch a crypto index ETF in the U.S. This year, NYSE Arca, a securities exchange, filed a request to list a Bitwise ETF that would also hold both Bitcoin and Ether. Additionally, in October 2023, NYSE Arca expressed interest in listing a Grayscale crypto index ETF, which would track a more diverse basket of spot cryptocurrencies. Regulators are still evaluating this proposal, and its potential approval could further diversify the landscape of crypto-related exchange-traded products.

A New Era for Crypto ETFs

The SEC’s approval of the Hashdex and Franklin Templeton crypto ETFs is a watershed moment for the cryptocurrency market, signaling increasing mainstream acceptance of digital assets. These ETFs could offer a much-needed bridge for traditional investors looking to gain exposure to digital currencies in a regulated and secure manner.

As demand for diversified crypto products continues to rise, it will be interesting to see if other financial giants follow suit, spurring further innovation in crypto ETFs. With Bitcoin and Ether already leading the charge, the approval of these ETFs could usher in a new era of institutional investment in the cryptocurrency sector.