US Fund Manager Franklin Templeton filed paperwork with the Securities and Exchange Commission Tuesday for a spot bitcoin exchange-traded fund, which would hold the cryptocurrency as the underlying asset and track its price. According to the filing, Franklin Templeton named Coinbase as the bitcoin custodian and Bank of New York Mellon as the custodian for cash holdings. As of 31 August 2023, Franklin Templeton had $1,421.4 billion in assets under management.
The asset manager's application comes after the SEC earlier this month delayed the decision on several such ETF applications, including from BlackRock and WisdomTree. The SEC's next deadline to respond to an application is Oct. 16. The agency can decide at that date to again delay a decision.
Franklin Templeton follows BlackRock and other financial heavyweights who have bet that the SEC may soon allow – or perhaps even be forced by the courts to allow – a spot bitcoin ETF to hit the public markets. Such a product would give everyday investors an easy means to gain exposure to the price of bitcoin in their brokerage accounts, alongside stocks and bonds.
Notably, this is the first attempt by Franklin Templeton, which has roughly $1.45 trillion worth of assets under management, to create a bitcoin ETF product. This is also notable as Franklin Templeton CEO Jenny Johnson has said in the past that "bitcoin is the greatest distraction from the greatest disruption in financial services, which is blockchain."
A Bitcoin ETF, or Bitcoin Exchange-Traded Fund, is a financial product designed to track the price of Bitcoin, the world's most well-known cryptocurrency, and allow investors to gain exposure to Bitcoin without owning the digital asset itself. Bitcoin ETFs have garnered significant attention from both retail and institutional investors because they provide a more familiar and regulated way to invest in the cryptocurrency market. However, it's crucial to conduct thorough research and consider the associated risks and costs before investing in any financial product, including Bitcoin ETFs, as the cryptocurrency market can be highly volatile and speculative. Additionally, the availability of Bitcoin ETFs may vary by region and may be subject to regulatory changes.
A Bitcoin ETF is structured as a traditional exchange-traded fund, which is a type of investment fund and exchange-traded product (ETP) with shares that can be bought and sold on a stock exchange. When an investor buys shares of a Bitcoin ETF, they are indirectly gaining ownership of Bitcoin through the ETF. However, they do not hold the actual Bitcoin themselves. Instead, the ETF holds the Bitcoin, and the investor holds shares in the ETF.
The ETF aims to track the price of Bitcoin by holding a certain amount of Bitcoin in custody. The ETF's share price typically mirrors the price of Bitcoin itself, including changes in value. Bitcoin ETFs make it easier for investors to gain exposure to Bitcoin because they can be bought and sold through traditional brokerage accounts, just like stocks. This accessibility is particularly appealing to institutional investors who may have restrictions on directly owning cryptocurrencies.
Bitcoin ETFs are subject to regulatory approval by relevant authorities in the jurisdictions where they are offered. The regulatory framework can vary by country, and the approval process can be lengthy and complex. Bitcoin ETFs provide a level of convenience and liquidity that owning physical Bitcoin does not. Investors do not need to worry about storage, security, or managing private keys. They can also trade the ETF during regular trading hours.
Tax implications of investing in Bitcoin ETFs may differ from holding Bitcoin directly. It's essential for investors to understand the tax treatment in their respective jurisdictions. ETFs are required to disclose their holdings regularly, providing transparency to investors about the assets held by the fund. Some Bitcoin ETFs may offer exposure to a diversified portfolio of cryptocurrencies, not just Bitcoin.
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