Asset management giant Franklin Templeton has taken a significant step in the cryptocurrency space, filing an application with the United States Securities and Exchange Commission (SEC) on September 12 to introduce a spot Bitcoin exchange-traded fund (ETF).
This move marks a notable addition to the growing list of financial institutions seeking to offer cryptocurrency-based investment products in the United States. Franklin Templeton joins the ranks of prominent names like Wisdom Tree, Valkyrie, Fidelity, VanEck, Bitwise, and Invesco, all of whom submitted spot ETF applications to the SEC. These applications were followed by a pivotal court ruling on August 29, where the SEC was directed to consider Grayscale’s request to transform its Bitcoin (BTC) futures ETF into a spot ETF.
Franklin Templeton’s S-1 registration statement outlines the proposed structure for the ETF, which would be established as a trust. Key custody responsibilities would be divided between Coinbase, entrusted with safeguarding the BTC holdings, and the Bank of New York Mellon, serving as the cash custodian and administrator. The fund’s shares are intended to be traded on the Cboe BZX Exchange, subject to regulatory approval.
The SEC’s decision deadline for Franklin Templeton’s application is set for October 16, 2023. This development underscores the ongoing interest of institutional players in offering cryptocurrency investment opportunities to traditional investors.
However, Franklin Templeton acknowledged the inherent risk associated with regulatory uncertainty in its application.
“Digital asset markets in the U.S. exist in a state of regulatory uncertainty, and adverse legislative or regulatory developments could significantly harm the value of bitcoin or the Shares, such as by banning, restricting or imposing onerous conditions or prohibitions on the use of bitcoins, mining activity, digital wallets, the provision of services related to trading and custody bitcoin, the operation of the Bitcoin network, or the digital asset markets generally.”
The company noted that the digital asset markets in the United States are still grappling with regulatory ambiguity. Potential adverse legislative or regulatory developments could have a significant impact on the value of Bitcoin or the ETF shares, ranging from restrictive measures to outright prohibitions on various aspects of the digital asset industry.
To provide investors with reliable valuation data, Franklin Templeton has partnered with digital asset index provider CF Benchmarks, a regulated entity in the United Kingdom. Daily valuations will be based on data from several prominent cryptocurrency exchanges, including Coinbase, Bitstamp, iBit, Kraken, Gemini, and LMAX Digital, with trades indexed at five-minute intervals.
As the cryptocurrency landscape continues to evolve, Franklin Templeton’s bold move reflects the industry’s growing maturity and the increasing interest of established financial institutions in offering cryptocurrency-based investment products to a broader audience. The outcome of the SEC’s decision on Franklin Templeton’s application will be closely watched by market participants and enthusiasts alike.
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