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The Nasdaq stock exchange has filed a request with the Securities and Exchange Commission (SEC) for authorization to list an Ethereum Exchange-Traded Fund (ETF) presented by Hashdex, an asset management firm. This ETF aims to incorporate a mix of spot ether holdings and futures contracts in its investment strategy, introducing a novel method for cryptocurrency investment within the existing regulatory framework.
Referred to as the Hashdex Nasdaq Ethereum ETF, this investment vehicle represents the first ’33 Act Ethereum futures filing under the ‘33 Act and is managed and regulated by Toroso Investments. Toroso Investments is recognized as a commodity pool operator by the Commodity Futures Trading Commission (CFTC) and is also affiliated with the National Futures Association.
The recent increase in cryptocurrency ETF applications has highlighted the importance of whether the proposed funds will feature futures contracts or spot assets. While the SEC has approved the former, the latter has yet to receive approval. Fund managers seem to be investigating a compromise, assessing their prospects within this regulatory environment.
The main investment objective of the Hashdex fund is to ensure that its shares reflect the daily changes in the Nasdaq Ether Reference Price. To fulfill this aim, the fund plans to invest in ether, ether futures contracts traded on the CME, as well as cash and cash equivalents. Nasdaq stated in the 19b-4 form:
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"Instead of holding 100% spot Ether, which could make it more susceptible to price manipulation in the spot market, the Fund will hold a mix of Spot Ether, Ether Futures Contracts, and cash,"
The Fund seeks to reduce its dependence on the spot market and mitigate concerns regarding potential manipulation in unregulated Ether spot exchanges by incorporating Ether Futures Contracts and cash into its portfolio, it further explained.
Related: Franklin Templeton files for spot Bitcoin ETF
Hashdex has entered the race for a spot Bitcoin (BTC) exchange-traded fund in the United States. However, Hashdex’s strategy differs from recent submissions as it will not rely on the Coinbase surveillance sharing agreement, choosing instead to source spot Bitcoin from physical exchanges within the CME market.
Last week, both Ark Invest and 21Shares submitted applications to the SEC for a spot ether ETF, a category of ETF also being sought by VanEck. The SEC has so far postponed its decisions on all applications it has received for spot cryptocurrency funds.
Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?
