The world's largest asset manager has established a new Delaware trust company for the iShares Ethereum Trust and filed an SEC application with Nasdaq. This marks BlackRock's first step towards the listing of a spot-based Ether ETF even before the approval of its Bitcoin fund.
In mid-June, BlackRock surprised the investment world with the filing of a spot-based Bitcoin ETF. Previously, the US Securities and Exchange Commission (SEC) rejected all applications from various issuers. However, the entry of the world's largest asset manager drastically increased the chances of approval. Even before the approval of the Bitcoin fund, which observers expect by mid-January, BlackRock is now preparing for an Ether ETF.
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ETH ETF similar to the iShares Bitcoin Trust
BlackRock made the first preparations for the Ether fund yesterday with the establishment of a Delaware trust called "iShares Ethereum Trust". iShares stands for BlackRock's ETF division. Commentators on social media quickly speculated about an imminent ETF application. A few hours later, the US stock exchange Nasdaq confirmed the plans by filing a form with the SEC. In doing so, BlackRock aims to launch the first spot-based Ether ETF.
As with the pending Bitcoin fund, the US crypto exchange Coinbase would act as custodian of the cryptocurrencies. BlackRock has also signed another market surveillance agreement with Coinbase, which the SEC already required for the spot Bitcoin ETF. A so far unnamed third party would be responsible for holding the cash and the product would be listed on Nasdaq.
BlackRock criticizes distinction between futures and spot products
At the beginning of October, the US Securities and Exchange Commission approved the first Ether ETFs, which are settled monthly via futures contracts on the CME. As with Bitcoin products, the SEC rejected all spot-based funds. These would be backed by real cryptocurrencies and not derivatives. However, due to the rolling costs of derivatives, spot ETFs offer better returns for investors, as CVJ.CH explained in its coverage of Ether ETFs. The SEC justifies the fundamental distinction between the two product types by protection against price manipulation on the CME.
This argument is not sufficient for BlackRock. In the 91-page application, the asset manager refers to the recently won lawsuit by crypto conglomerate Grayscale. In this case, a court also ruled that the SEC's reasoning was insufficient. Both product types are ultimately based on the spot prices of the cryptocurrency. Therefore, BlackRock believes its Ether ETF to meet all requirements.
"The Sponsor [BlackRock] believes that the distinctions between the 1940 Act and the 1933 Act, and the surveillance-sharing available for the CME ETH futures market versus the spot ETH market, are not meaningful in the context of ETH-based ETF and ETP proposals, and that such reasoning cannot be a basis for the Commission treating ETH futures ETFs differently from spot ETH ETPs like the Trust. [BlackRock] believes that the Commission’s approval of ETH futures ETFs means it must also approve spot ETH ETPs like the Trust." - Nasdaq filing for the iShares Ethereum Trust
