After months of deliberation and review extensions since June, the U.S. Securities and Exchange Commission (SEC) has officially approved the first-ever exchange-traded funds (ETFs) combining Bitcoin and Ethereum.
The SEC granted authorization for Nasdaq to list the Hashdex Nasdaq Crypto Index US ETF and for Cboe BZX Exchange to list the Franklin Crypto Index ETF, as outlined in filings released on Thursday.
According to the filings, the funds will allocate their holdings based on the free-float market capitalizations of Bitcoin and Ethereum. Bloomberg ETF analyst Eric Balchunas anticipates the funds will launch in January, featuring an approximate 80% Bitcoin and 20% Ethereum split, reflecting current market proportions.
Compliance and Transparency
Both ETFs must adhere to stringent listing requirements, including transparent reporting of portfolio holdings and pricing. Exchanges will monitor compliance and retain the authority to delist the ETFs if requirements are not met.
Intraday indicative values for the ETFs will be disseminated every 15 seconds during standard trading hours, providing real-time updates for investors.
A Competitive Crypto ETF Market
The approval adds to the growing activity in the crypto ETF sector. BlackRock’s Bitcoin ETF (IBIT) leads the market with $56 billion in assets under management (AUM) and over $4.4 billion in trading volume. Fidelity’s FBTC and Grayscale’s GBTC follow closely, each managing about $20 billion in AUM.
Despite these approvals, the crypto ETF market has recently seen volatility. Coinglass data from December 19 indicates significant outflows, with major funds experiencing net withdrawals of approximately $671 million.
SEC’s Rationale
The SEC extended its review earlier this year, citing the need for additional time to evaluate proposed rule changes and raised concerns. Franklin Templeton’s ETF, however, received ”accelerated approval” due to its similarity to previously sanctioned spot crypto products and its alignment with established market standards.
The regulator highlighted the importance of surveillance-sharing agreements, which enable exchanges to monitor and share trading data to mitigate risks of fraud and market manipulation. This aspect was a key consideration in the approval process.
Broader Industry Developments
The SEC’s decision comes amidst other notable crypto initiatives. Grayscale Investments, for instance, recently filed to convert its Solana Trust into a spot ETF on NYSE Arca, aiming to enhance investor access to Solana (SOL) through regulated exchanges.
As crypto ETFs continue to gain traction, the dual Bitcoin-Ethereum funds mark a significant milestone, offering investors diversified exposure to the two largest cryptocurrencies while meeting regulatory standards for transparency and security.
Featured image from: decrypt.com