As major institutions flock to crypto ETFs, BlackRock, the world's largest asset management company, submitted an application for an Ethereum spot exchange-traded fund (ETF) to the U.S. Securities and Exchange Commission (SEC) on November 15. The ETF is called iShares Ethereum Trust and aims to reflect the price performance of Ethereum.
After the news came out, the price of Ethereum (ETH) rose nearly 2% in the short term to around US$2,080.
Bitpush previously reported that the iShares Ethereum Trust entity was registered with the Delaware Department of Corporations last week (November 9), with the main purpose of owning Ethereum in exchange for shares issued by the trust.
Following the application for a spot Bitcoin ETF, the move marks an important step for BlackRock to deploy the crypto industry, and it will become one of the Wall Street giants that provide cryptocurrency exposure. The approval of a spot ETF would be a positive signal for the broader cryptocurrency market, potentially freeing up billions of dollars in funds from institutional investors.
Coinbase Custody
Each share of the iShares Ethereum Trust represents a fractional interest in the trust’s net assets, which are primarily comprised of Ethereum held by Coinbase Custody Trust. In addition, the ETF will use the CME CF Bitcoin Reference Rate managed by CF Benchmarks (a subsidiary of Kraken) as its benchmark. This decision is similar to the choice made by BlackRock for its proposed spot Bitcoin ETF.
The shares will be listed and traded on the Nasdaq under a yet-to-be-announced ticker symbol.
Filing for a cash ETF involves two steps, requiring a 19b-4 filing approved by the SEC’s Division of Trading and Markets and an S-1 filing or prospectus with the Division of Corporate Finance.
BlackRock: SEC ‘must’ approve spot Ethereum ETF
BlackRock said in its filing that the SEC must approve its spot Ethereum ETF.
“To date, the lack of ETPs [exchange-traded products] that hold spot ETH has exposed U.S. investors’ assets to significant risk as investors who would otherwise seek exposure to crypto assets through spot ETH ETPs have been forced to seek alternative investments through often riskier means,” the Nasdaq Stock Market said in an SEC filing last week on behalf of the company.
Nasdaq also stressed that the approval of the spot ETH ETP would represent a major victory in protecting American investors in the crypto asset space. It meets all the requirements set by the SEC to protect investors and has a monitoring protocol for monitoring market fraud and manipulation. Nasdaq claims that, like CME, it is also a member of the Inter-Market Monitoring Group (ISG), which monitors and reports all members' illegal activities. In addition, it also cooperates with Coinbase, which can monitor the spot market.
“In summary, the Exchange and the Sponsor believe that the Proposal and the analysis included herein are sufficient to demonstrate that the CME ETH futures market is a regulated market of substantial size because it is related to both the CME ETH futures market and the spot ETH market, and that the Proposal should be approved,” the filing reads.
Nasdaq also noted that the sponsor believes that “the differences between the Investment Company Act of 1940 and the Securities Act of 1933, and the shared regulation of the CME ETH futures market and the spot ETH market, do not make sense in the context of the proposed ETH-based ETFs and ETPs.”
In the Grayscale v. SEC case earlier this year, the court ruled that the SEC failed to explain why it approved the Bitcoin futures ETP but disagreed with Grayscale’s proposal to convert its Bitcoin Trust (GBTC) into a spot Bitcoin ETF. The court subsequently vacated the SEC’s disapproval order, and market sentiment shifted.
Industry experts and ETF analysts predict that there is a 90% chance that a spot Bitcoin ETF will be approved by early 2024, while a spot ETH ETF could be approved after that.
According to Bloomberg, citing people familiar with the matter, large trading firms including Jane Street, Virtu Financial and Jump Trading have been in talks to provide liquidity for BlackRock's proposed spot Bitcoin ETF if it receives regulatory approval. Bitcoin prices have risen over the past month due to the prospect of spot Bitcoin ETF approval, and the potential approval of an Ethereum ETF could also boost ETH prices.
Ryan Lee, chief research analyst at Bitget, said in an exclusive interview with BeInCrypto that similar to the previous BTC ETF application, BlackRock's new move is expected to bring mainstream institutional recognition and capital allocation to Ethereum. Ryan Lee said: "Some institutions may shift funds previously bet on BTC to ETH in search of potential greater returns."
