Franklin Templeton Proposes Bitcoin and Ethereum ETF Merger: What It Entails
Franklin Templeton, a trillion-dollar asset manager, has made headlines by proposing an innovative Bitcoin [BTC] and Ethereum [ETH] index exchange-traded fund (ETF). This merger would be the first of its kind, combining BTC and ETH into a single investment fund, providing a simpler, more streamlined way for investors to gain exposure to the two largest cryptocurrencies by market capitalization.
If approved by the U.S. Securities and Exchange Commission (SEC), this ETF would allow investors to hold Bitcoin, Ethereum, and cash equivalents without directly owning the digital assets. This move is seen as an effort to simplify cryptocurrency investments, which can be complex and volatile when traded on traditional crypto exchanges.
What the ETF Includes
The proposed ETF will feature:
- Bitcoin
- Ethereum
- Cash equivalents (short-term securities maturing in less than three months)
This approach will provide an easier and potentially safer way for both institutional and retail investors to participate in the crypto market, offering a more accessible path to these digital assets.
Timing and Market Impact
Interestingly, this proposal comes at a time when BTC ETFs have experienced outflows of $52.9 million, while ETH ETFs have seen inflows of $19.8 million, as reported by Farside Investors. If Franklin Templeton’s ETF is approved, it would mark a significant milestone by merging both assets into a single fund, reducing the need for investors to manage individual positions in Bitcoin and Ethereum.
Market analysts suggest that the ETF could have a positive impact by mitigating some of the volatility and complexities often associated with cryptocurrency investments. It would provide simplified access, which may lead to increased market participation and liquidity for both assets.
How the ETF Will Work
The ETF will be available in blocks of 50,000 shares, with each share priced based on the net asset value (NAV) of the underlying Bitcoin and Ethereum.
Unlike other funds, Franklin Templeton’s ETF will not engage in staking or income-generating activities with its digital assets. Instead, it will maintain a straightforward approach focused solely on price exposure to Bitcoin and Ethereum.
The custody of these digital assets will be handled by Coinbase Custody Trust Company, while the Bank of New York Mellon will serve as the custodian for the fund’s cash and cash equivalents. This structure is designed to ensure the security and smooth functioning of the ETF.
SEC Approval and Anti-Fraud Measures
As with any crypto-related fund, the ultimate approval of Franklin Templeton’s ETF will depend on the SEC’s evaluation, especially regarding anti-fraud and market manipulation safeguards. The SEC has historically been cautious with crypto ETFs, ensuring that adequate measures are in place to prevent fraud in regulated markets.
Competition from Hashdex
Franklin Templeton is not the only asset manager looking to create a groundbreaking ETF. In July 2024, Hashdex, a prominent crypto asset management firm, filed a proposal with the SEC for its own Crypto Index ETF, which would directly hold spot Bitcoin and Ethereum.
Hashdex’s submission of its S-1 registration statement to the SEC highlights the growing interest in providing institutional-grade investment products for the crypto market. If approved, Hashdex’s Nasdaq Crypto Index US ETF could become a significant player in the evolving crypto landscape.
