BlackRock, the world’s biggest asset manager, submitted an application with the United States Securities and Exchange Commission (SEC) for an Ethereum (ETH) exchange-traded fund (ETF) on November 15.
The proposed ETF would be called the iShares Ethereum Trust and be part of BlackRock’s iShares brand, including the iShares Bitcoin (BTC) Trust bitcoin ETF. The iShares Ethereum Trust aims to reflect the performance of the world’s second-largest cryptocurrency price. Coinbase would be appointed as the custodian to hold the Ether underlying the ETF.
The ether and bitcoin iShares ETFs would allow more mainstream investors to gain exposure to these major cryptocurrencies through their brokerage accounts and existing ETF workflows.
A week ago, BlackRock registered the iShares Ethereum Trust with Delaware’s Division of Corporations, and six months ago it applied for a spot Bitcoin ETF.
Spot Ethereum ETFs In High Demand
BlackRock sparked a rush for spot Bitcoin ETFs in 2023, reflecting rising institutional interest in cryptocurrencies. Within six months, BlackRock and many institutions filed for spot Ethereum ETFs.
The ETF issuer files a 19b-4 with the SEC’s Trading and Markets division. This two-step process also requires the Corporate Finance division’s approval of the S-1 filing or prospectus.
The pursuit of an Ethereum ETF in 2023 began on November 10 when Grayscale Investments applied to the SEC to convert its Ethereum trust into an ETF.
In the previous bull market, many large institutions applied for cryptocurrency spot ETFs. However, the SEC rejected them, saying the crypto market was too small to support a spot cryptocurrency ETF.
Spot Crypto ETFs May Get SEC Approval in 2024
The potential approval rate for a bitcoin futures ETF in 2024 could be as high as 90%. The spot Ethereum ETF might follow after, according to the ETF analysts. Institutional investment into cryptocurrency spot ETFs is increasing as the crypto market recovers.
So far, regulatory authorities have approved many crypto ETFs based on futures, tracking the prices of bitcoin or ether futures contracts instead of tracking actual underlying assets. Most investors favor spot ETFs because they charge lower fees and will lead to more direct exposure to the market.
The SEC feels more at ease with crypto-ETFs based on futures, as they have extra protection and oversight for investors under the 1940 Act, unlike spot ETFs governed by the 1933 Act.
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However, some experts have disputed the SEC’s reasoning. They argue that spot ETFs can implement adequate safeguards against fraud and manipulation. Further, they state the SEC should not treat crypto futures and spot ETFs differently.
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