The Nasdaq stock exchange has filed a request with the Securities and Exchange Commission (SEC) to gain approval for the listing of an Ethereum exchange-traded fund (ETF) offered by Hashdex, an asset management firm. Hashdex’s ETF, known as the Hashdex Nasdaq Ethereum ETF, seeks to introduce a novel approach to cryptocurrency investment within the regulatory framework by combining spot ether holdings and futures contracts in its portfolio.
This investment fund is groundbreaking in that it represents the first ’33 Act Ethereum futures filing under the ’33 Act and is under the oversight of Toroso Investments. Toroso Investments holds registration as a commodity pool operator with the Commodity Futures Trading Commission (CFTC) and is also a member of the National Futures Association.
The recent surge in cryptocurrency ETF applications has placed significant emphasis on whether these proposed funds will include futures contracts or spot assets. While the SEC has granted approval for the former, the latter remains unapproved. Fund managers are now exploring a middle-ground option, testing the waters in this evolving regulatory landscape.
The primary objective of the Hashdex fund is to ensure that its shares closely reflect the daily fluctuations in the Nasdaq Ether Reference Price. To achieve this goal, the fund plans to allocate its assets to investments in ether and ether futures contracts traded on the CME, as well as cash and cash equivalents. As stated in the 19b-4 form filed with Nasdaq, “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 aims to reduce its reliance on the spot market and address concerns about potential manipulation on unregulated ether spot exchanges by including ether futures contracts and cash in its holdings.
This approach sets Hashdex apart from competitors in the race for a spot Bitcoin exchange-traded fund in the United States, as it will not rely on the Coinbase surveillance sharing agreement and instead acquire spot Bitcoin from physical exchanges within the CME market.
In the past week, both Ark Invest and 21Shares have submitted applications to the SEC for a spot ether ETF, a type of ETF also pursued by VanEck. To date, the SEC has deferred its decisions on all the applications it has received for spot cryptocurrency funds.
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