Financial management giant Fidelity had filed to create a spot Ethereum ETF that would be listed on an exchange owned by CBOE Global. The news follows a similar filing from BlackRock a week ago.
It was revealed late last week that financial management giant Fidelity had filed to create a spot Ethereum ETF that would be listed on an exchange owned by CBOE Global. They join fellow institutions, BlackRock, and six others as applicants for a spot Ethereum ETF.
For the new ‘Fidelity Ethereum Fund’, according to the filing, “each Share will represent a fractional undivided beneficial interest in the Trust’s net assets. The Trust’s assets will consist of ETH held by the Custodian on behalf of the Trust.”
The fund is pitched as a low-risk way for investors to gain exposure to ETH. Investors will have regulated avenues to gain exposure to Ethereum price action, without needing to worry about custody. This has the potential to drive a broader adoption of cryptocurrency and introduce a new investor base to the asset class.
Retail investors in the United States have not had a regulated, easily accessible spot ETF version of Bitcoin or Ethereum like their counterparts in Europe and other countries. In mid-August 2023, Europe welcomed its first-ever spot Bitcoin ETF after the launch of Jacobi Asset Management’s Jacobi FT Wilshire Bitcoin ETF. “U.S. retail investors have lacked a U.S. regulated, U.S. exchange-traded vehicle to gain exposure to ETH,” the filing explained, noting that current channels for retail investors to access Ethereum involve dealing with counterparty risk, legal uncertainty, and technical risk.
Fidelity Follows BlackRock
The Fidelity news comes soon after BlackRock, the world’s largest asset manager, filed for an Ethereum exchange-traded fund (ETF) with the US Securities and Exchange Commission (SEC) last week. Depending on whose is approved first, the ETH ETF would be the first of its kind in the United States, and would allow investors to gain exposure to Ethereum without having to purchase the cryptocurrency directly.
The ETF would track the spot price of Ethereum, which means that investors would be investing in the price of Ethereum itself, rather than in a company that is involved in the Ethereum ecosystem. The ETF would be listed on the New York Stock Exchange (NYSE) and would be available to both retail and institutional investors.
Following the news, the price of ETH surged to its highest level this year near $2,132, before pulling back afterwards.
The price of ETH jumped on the ETH news
The immediate jump in price is similar to the Bitcoin rally in June when BlackRock filed an application to list a spot Bitcoin ETF. ETFs stand for exchange-traded products, and they offer a convenient way for investors to buy exposure to an asset without having to own it themselves.
The news follows BlackRock’s existing application for a spot-based Bitcoin ETF, which is expected to be approved by the US Securities and Exchange Commission by Q1 2024.
The company’s Ethereum ETF plan was revealed in a filing by Nasdaq, the U.S. exchange where BlackRock will seek to list the ETF. On Thursday, we learned that the corporate entity “iShares Ethereum Trust” was registered in the state of Delaware; iShares is the name of BlackRock’s ETF division.
The filing states that U.S.-based crypto exchange Coinbase will be the custodian for the ETH held by the ETF, while an unnamed third party will hold its cash. BlackRock has a market-surveillance agreement with Coinbase; these surveillance-sharing agreements are seen as necessary for crypto ETFs to win approval by the U.S. Securities and Exchange Commission.
“Either CME surveillance can detect spot-market fraud that affects both futures ETFs and spot exchange-traded products, or that surveillance cannot do so for either type of product,” said the filing. “Having approved ETH futures ETFs in part on the basis of such surveillance, the Commission has clearly determined that CME surveillance can detect spot-market fraud that would affect spot ETPs, and the Sponsor thus believes that it must also approve spot ETH ETPs on that basis.”
Meanwhile, Galaxy Digital founder Mike Novogratz spoke to investors and said that 2024 will see the long awaited institutional adoption of crypto assets, following the approval of a slew of ETF applications. During Galaxy Digital’s third-quarter earnings call Novogratz said that the SEC’s approval of multiple ETFs “is now not a matter of if but when.” Galaxy Digital has filed for spot Bitcoin and ETH ETF applications.
Not a Sure Thing
Whether or not the spot-based Ethereum ETFs will be approved, however, remains uncertain. At present, the market’s view is that the long-awaited Bitcoin spot ETFs are almost certainly going to be approved by Q1 2024.
This is reflected by the analysis of Bloomberg ETF analyst James Seffart, who puts the odds of a spot Bitcoin ETF approval at 90% by January 10 as the tweet below shows.
A spot ether ETF approval is less certain. The SEC has up to 240 days to decide whether or not to approve a product, which puts any potential release date deep into late 2024 at the earliest.
Another potential complication is the murky status of ETH itself, in the eyes of regulators. While the SEC views Bitcoin as a commodity, and not a security, SEC Head Gary Gensler has consistently declined to offer a definitive statement of ETH, instead hinting that outside of Bitcoin, all crypto assets are potentially securities.
As the crypto industry continues to push for clearer guidelines, the status of ETH in the eyes of the SEC will be one of the first and most important dominoes to fall.