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BlackRock submits S-1 form for its spot Ether ETF

BlackRock, the world's most substantial asset manager, has taken another decisive step into the cryptocurrency market by filing an S-1 form for a spot Ether (ETH) exchange-traded fund (ETF) with the United States Securities and Exchange Commission (SEC).

The official filing on November 15 follows BlackRock’s registration of the iShares Ethereum Trust with Delaware’s Division of Corporations a week prior and its application for a spot Bitcoin ETF about six months ago.

According to the filing, BlackRock’s proposed ETF, named the iShares Ethereum Trust, is set to reflect the performance of Ether‘s price. The iShares brand, associated with BlackRock’s ETF products, also includes the iShares Bitcoin Trust. The company has named Coinbase as the custodian for the ETF’s underlying Ethereum holdings, with details on a custodian for cash holdings yet to be disclosed.

BlackRock’s Ethereum ETF is expected to hold Ethereum directly and will aim to track the price of Ethereum before fees and expenses. The ETF’s net asset value (NAV) will be calculated daily using the CME CF Ether-Dollar Reference Rate index. BlackRock outlined several benefits for investors opting for the ETF instead of direct ownership of Ethereum, including avoiding the complexities of digital asset wallets and keys, the convenience of traditional brokerage accounts, and the continuous creation and redemption of ETF shares.

It’s necessary to note that filing for a spot ETF is a two-step process. The ETF issuer must acquire approval from the SEC’s Trading and Markets division for its 19b-4 filing and from the Corporate Finance division for its S-1 filing or prospectus. Numerous institutions filed for crypto spot ETFs during the previous bull cycle, only to be rejected by the SEC, which argued that the crypto market size was insufficient for a spot crypto ETF.

On the other hand, BlackRock’s move underlines a growing institutional interest in the cryptocurrency market. The company led the spot Bitcoin ETF rush earlier in 2023 and now joins a growing list of institutions filing for a spot ETH ETF. ETF and market analysts alike predict a high probability—an estimated 90%—of a spot Bitcoin ETF’s approval by early 2024, with the spot ETH ETF likely to follow suit.

The institutional excitement for cryptocurrency-based spot ETFs is emerging as the crypto market begins a recovery phase, having regained a significant portion of the ground lost during the last bear market. However, adoption and impact on trading volumes remain dependent on the SEC’s approval, the prospect of which is still uncertain amidst pending Bitcoin ETF applications.

While the management fee and additional expenses remain undisclosed in the current filing, BlackRock specified that Ethereum would be sold periodically to cover such fees, thereby creating tax events. As part of the ETF’s mechanics, BlackRock plans to continuously issue ETF shares to authorized participants in exchange for Ethereum deposits. However, the filing did not provide a planned launch date for the ETF or divulge the ticker under which it would be listed on the Nasdaq.

The prospect of an Ethereum ETF from a major player like BlackRock could significantly drive institutional adoption of Ethereum, contributing to overall crypto market dynamics. With the promise of greater accessibility and convenience for investors, the proposed ETF may well leave a substantial impact on the crypto landscape.


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