Crypto index investing to start? U.S. asset managers seek SEC approval

• Hashdex and Franklin Templeton race for U.S. crypto index ETF.
• The diversification benefits of crypto indices make them lucrative. 

Crypto index investing seems to be gaining momentum based on recent filings from potential issuers.

On the 1st of October, Hashdex submitted an amended registration filing (S-1) with the U.S. SEC after the agency requested more time to review its crypto index ETF’s initial application. 

Another asset manager, Franklin Templeton, seeks to offer a similar product that tracks Bitcoin and Ethereum.

It filed an S-1, a registration statement, with the regular in mid-August. 

On the 2nd of October, the SEC also received a proposed rule change (19b 4) on the same from the Chicago Board Options Exchange (Cboe). The regulator must sign off on these two forms before the index ETF begins trading. 

Put differently, asset managers wish to drive more crypto index ETF investing.

For context, as opposed to single-asset ETFs, like the approved spot Bitcoin [BTC] and Ethereum [ETH] ETFs, an index ETF offers exposure to more than one asset. 

Why crypto index investing

Several multi-coin crypto indices are already available, but they are only open to accredited investors in the U.S.  For example, the Bitwise 10 Crypto Index Fund (BITW) tracks 10 different coins, including BTC, ETH, and SOL. 

The accredited investors can access them through private exchanges and OTC (over-the-counter) markets.

If approved, Hashdex and Franklin Templeton applications would allow some crypto indices to be accessible through public exchanges like NYSE or Nasdaq.  

It’s worth noting that Hashdex already has an approved crypto index ETF in Brazil and aims to replicate it in the U.S. 

The value of crypto indices lies in their diversification approach. They allow investors to have exposure to numerous digital assets without worrying about the volatility or performance of a single token.

It’s like investing in the S&P 500 index, which tracks a basket of top U.S. stocks without relying on one stock results.  

On his part, Julien Vallet, CEO of Netherlands-based crypto firm Finst, recently noted that 30% of the firm’s retail and institutional investors sought diversification through crypto index ETFs. 

Apart from diversification, the indices also reduce operation complexity linked to liquidity, regulators, etc., associated with digital assets. 

In July, just after the approval of spot ETH ETFs, Nate Geraci of ETF Store predicted that crypto index ETFs and actively managed crypto ETFs would be the next thing.

His projection seems to be unfolding. This would further reinforce digital assets’ position as an alternative investment class.