Franklin Templeton, a major player in asset management, has unveiled a new product known as the “Franklin Ethereum TR Ethereum ETF,” with the official code EZET. This Ethereum spot ETF has made its debut on the Depository Trust and Clearing Corporation (DTCC) website, a crucial platform for handling securities transactions in the United States.
The listing on DTCC indicates that the ETF is now ready for creation and redemption, which is a crucial feature for these funds. This means that investors have the flexibility to initiate or close their positions based on market demand. This flexibility helps ensure that the ETF’s price closely aligns with the actual value of Ethereum it represents.
However, it is important to note that just because the ETF has been listed does not mean that it has received final approval from the Securities and Exchange Commission (SEC). While the DTCC lists many securities eligible for trade and settlement, the SEC’s approval process is much more rigorous and focuses on regulatory criteria.
On February 12, Franklin Templeton submitted an S-1 filing to the SEC for this spot Ether ETF, signaling its intentions. If approved, the ETF will be listed on the Chicago Board Options Exchange under the name “Franklin Ethereum ETF.” However, the SEC has postponed its decision and extended the deadline to June 11 in order to further review the application. This extension gives the SEC more time to carefully consider the proposed rule change for trading these shares on the Cboe BZX Exchange.
The outlook for Ethereum ETFs is currently uncertain. Meetings between ETF issuers and the SEC have left companies like VanEck and ARK Investment Management, among others, feeling discouraged. These companies have applied to the SEC with the hope of directly tracking Ethereum’s spot price. However, feedback from the SEC has not been promising, suggesting that these applications may be denied. This is in contrast to the more open discussions that led to the approval of spot Bitcoin ETFs earlier this year.
The change in dialogue intensity is due to the leadership of Gary Gensler, who has a critical stance on cryptocurrencies and has raised concerns about market manipulation. This has been a major obstacle for spot Bitcoin ETFs in the past. Industry experts, like Todd Rosenbluth of VettaFi, believe that regulatory approval for Ethereum ETFs is likely to be delayed until later in 2024 or even beyond. Despite the potential rejections, companies remain engaged and plan to submit additional documentation to keep the lines of communication open with the SEC.
The market has responded to this news with a mixture of hope and caution. While Ethereum’s price has seen some growth this year, it still lags behind the stronger performance of Bitcoin. The expectation of a regulatory rejection is dampening Ethereum’s price growth, creating a cautious atmosphere among investors.
The ongoing discussions between the SEC and industry players, including a recent meeting with Coinbase regarding Grayscale’s application to convert its Ethereum Trust into an ETF, highlight the complex regulatory landscape. These discussions revolve around whether the surveillance mechanisms in place for Bitcoin futures ETFs, approved in 2021, are sufficient for monitoring spot Ethereum ETFs.
As the discussions continue, some experts, like Matt Hougan from Bitwise Asset Management, believe that the SEC’s hesitation may stem from a need for more data on Ethereum’s market behavior. If the SEC ultimately decides against Ethereum ETFs, there is a possibility of legal challenges, with industry stakeholders prepared to advocate for their interests in court.
