Franklin Templeton Moves To Initiate A Bitcoin Spot ETF

In a recent development, Franklin Templeton, a leading asset manager with $1.5 trillion AUM, has approached the United States Securities and Exchange Commission (SEC) with an application to introduce a spot Bitcoin exchange-traded fund (ETF). This move follows a series of delays by the SEC regarding decisions on spot ETF proposals from renowned firms including WisdomTree, Valkyrie, and Fidelity, among others.

Additionally, an August 29 court verdict mandated the SEC to reconsider Grayscale’s request to convert its Bitcoin futures ETF to a spot ETF.

Coinbase For Custody

Per the submitted application details, the proposed fund is intended to be set up as a trust. Like so many other ETF proposals, digital currency exchange Coinbase would oversee the Bitcoin holdings, while the Bank of New York Mellon is slated to manage cash and administration responsibilities. The fund's shares are planned for trading on the Cboe BZX Exchange, with the SEC scheduled to make a decision on the proposal by October 16.

In its filing, Franklin Templeton was candid about potential challenges stemming from regulatory ambiguities, stating:

- 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 custodying bitcoin, the operation of the Bitcoin network, or the digital asset markets generally.

- If regulators subject the Fund or the Sponsor to regulation as a money services business (“MSB”) or money transmitter, this could result in extraordinary expenses to the Fund or the Sponsor and also result in decreased liquidity for the Shares.

- Regulatory changes or interpretations could obligate an Authorized Participant, the Fund, the Trust, the Sponsor or other Fund service providers to register and comply with new regulations, resulting in potentially extraordinary or nonrecurring expenses to the Fund.

- The treatment of digital currency for U.S. federal, state and local income tax purposes is uncertain.

CF Benchmarks, a UK-regulated digital asset index provider, will offer daily evaluations, sourcing data from several prominent exchanges such as Coinbase, Kraken, and Gemini. These evaluations will utilize a five-minute interval indexing approach.

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