Grayscale Investments has now officially submitted an application to the US Securities and Exchange Commission (SEC) for a new cryptocurrency Exchange-Traded Fund (ETF). However, unlike the numerous Bitcoin spot ETFs awaiting regulatory approval, this time Grayscale's ETF focuses on Ethereum futures.
The proposal outlines that this ETF will not directly transact in Ethereum nor need to retain an Ethereum custodian. Instead, it will exclusively deal in futures contracts. Grayscale's move towards an Ethereum-focused ETF comes after recent legal triumphs; a federal judge overturned the SEC's decision blocking Grayscale from converting its Bitcoin trust into a spot ETF. This legal victory has fueled Grayscale's optimism in attaining approval for both its Bitcoin and Ethereum ETFs.
Notably, the SEC had already given the green light to Bitcoin futures ETFs in 2021, enabling investors to speculate on the future prices of digital assets. However, these investment vehicles are based on futures contracts and do not involve the actual purchase or storage of crypto.
Regarding the ETF itself, the filing reads:
“The trust will deposit an initial margin amount to initiate an open position in futures contracts. A margin deposit is like a cash performance bond. It helps assure the trader’s performance of the futures contracts that he or she purchases or sells.”
The eagerness in the market for spot crypto ETFs is palpable, with the SEC reviewing multiple applications, including those from financial giants like BlackRock. A crypto ETF would facilitate traditional investors to gain exposure to crypto without the challenges of storing and safeguarding their holdings. Moreover, it would allow many institutional players to join the space in a more secure and transparent way.
This will possibly open the door to the mainstream and allow cryptocurrencies to be recognized in traditional financial markets, and one day, maybe, become a financial vehicle accepted everywhere.