Nasdaq has made a significant move by submitting an application to the Securities and Exchange Commission (SEC) for the approval of an Ethereum Exchange-Traded Fund (ETF), developed by Hashdex, an established asset management company. This ETF sets itself apart by incorporating a combination of spot ether holdings and futures contracts within its portfolio, marking an innovative approach to cryptocurrency investment within the regulatory framework.
Named the Hashdex Nasdaq Ethereum ETF, this investment vehicle represents the first filing under the ’33 Act for Ethereum futures and spot holdings. Notably, it is overseen and supervised by Toroso Investments, a registered commodity pool operator with the Commodity Futures Trading Commission (CFTC) and a member of the National Futures Association.
The recent surge in cryptocurrency ETF applications has brought attention to whether proposed funds aim to include futures contracts or spot assets. While the SEC has granted approval for the former, the latter remains unapproved. Fund managers are exploring a middle-ground strategy, navigating this evolving regulatory landscape.
The primary objective of the Hashdex fund is to ensure that its shares closely track the daily fluctuations in the Nasdaq Ether Reference Price. To achieve this, the fund plans to allocate its assets to investments in ether, ether futures contracts traded on the CME, as well as cash and cash equivalents. Nasdaq explained in the 19b-4 form that instead of holding 100% spot Ether, which could be vulnerable to price manipulation in the spot market, the fund will maintain a mix of Spot Ether, Ether Futures Contracts, and cash.
The fund’s strategy aims to reduce its dependence on the spot market and address concerns regarding potential manipulation in unregulated Ether spot exchanges by incorporating Ether Futures Contracts and cash in its holdings. Hashdex has also ventured into the competition for a spot Bitcoin exchange-traded fund in the United States, with a unique approach that does not rely on the Coinbase surveillance sharing agreement. Instead, it opts to acquire spot Bitcoin from physical exchanges within the CME market.
In the preceding week, both Ark Invest and 21Shares submitted applications to the SEC for a spot ether ETF, a type of ETF also being pursued by VanEck. The SEC has yet to make determinations on the applications it has received for spot cryptocurrency funds, creating a dynamic environment in the world of cryptocurrency investment.