Nasdaq’s Hashdex Joins Crypto ETF Race with Mixed Ether Filing

Key Insights:

• Nasdaq’s collaboration with Hashdex introduces a unique blend of spot and futures assets in the crypto ETF race.
• SEC scrutiny and labelling Coinbase as “unregulated” complicate ETF approvals.
• Exchange-traded funds provide a straightforward way to invest in digital currencies without direct ownership hassles.

Nasdaq has formally applied to the Securities and Exchange Commission (SEC) to list an Ethereum Exchange-Traded Fund (ETF). Developed in collaboration with asset management company Hashdex, the proposed fund offers a blend of spot ether and futures contracts.

Navigating the Regulatory Landscape

The Hashdex Nasdaq Ethereum ETF enters a crowded field of crypto ETF applications currently under review by the SEC. While the SEC has approved ETFs focusing on futures contracts, it has yet to endorse any that deal exclusively with spot assets. Hashdex aims to tackle this challenge by incorporating spot ether and futures contracts into its fund portfolio.

Additionally, Toroso Investments, registered with the Commodity Futures Trading Commission (CFTC) and a member of the National Futures Association, will oversee the fund’s operations. This lends an extra layer of regulatory compliance to the investment vehicle.

Aligning with Nasdaq Ether Reference Price

The primary objective of this ETF is to follow the Nasdaq Ether Reference Price closely. The fund plans to diversify its assets across the ether, ether futures contracts available on the CME, and cash equivalents to achieve this. As per Nasdaq’s 19b-4 form, the fund will maintain a portfolio of spot ether, futures contracts, and cash.

This diversified asset mix aims to reduce the fund’s susceptibility to potential price manipulation in unregulated spot markets. By incorporating ether futures contracts and cash into its holdings, the Hashdex ETF aims to offer a more secure option for investors.

Is Hashdex Casting a Shadow on Other Asset Managers?

Nasdaq’s filing frequently refers to “unregulated spot exchanges,” appearing to swipe at Coinbase and other asset managers like Ark Invest, who have submitted applications for Ethereum-related ETFs and selected Coinbase as their custodian.

Labeling Coinbase as an “unregulated spot exchange” raises questions, as this characterization could potentially impact the SEC’s assessment of other pending applications.

Moreover, the choice of Coinbase as the SSA and custodian by asset managers such as BlackRock had already stirred debate. Critics argue that the SEC might be less inclined to green-light applications associated with Coinbase, given the ongoing litigation involving the crypto exchange.

While Hashdex’s strategy is often cited as “innovative,” caution is advised regarding how this approach could affect other applicants and, more broadly, the cryptocurrency industry as a whole.

What is an ETF?

Over the past few years, Exchange-Traded Funds (ETFs) have become a convenient and accessible investment option spanning different asset types, including cryptocurrencies. These funds provide investors with a means to capitalize on the price changes of individual assets or a basket of assets, all without the need for direct ownership.

Regarding cryptocurrency-focused ETFs, these funds mirror the price behaviour of a particular digital currency, letting investors partake in crypto markets without the complexities of owning and managing the assets firsthand. This bypasses the hassle of setting up exchange accounts or handling crypto wallets, offering a time-efficient investment approach.