WisdomTree has applied to the SEC for approval for its own ETF product based on Ethereum.
This is a first for the industry in the US, seeing as there are already other ETF applications pending, but they are based on Bitcoin.
The product would be called WisdomTree Ethereum Trust. WisdomTree’s intention is to list its ETF as soon as the SEC makes it possible, on the Cboe BZX exchange.
The SEC form states that:
“The Trust’s investment objective is to gain exposure to the price of ether, less expenses and liabilities of the Trust’s operations. In seeking to achieve its investment objective, the Trust will hold ether and will value its Shares daily based on the [CF Ether-Dollar US Settlement Price] (the “Reference Rate”), which is an independently calculated value based on an aggregation of executed trade flow of major ether spot exchanges”.
The Trust will not directly buy or sell Ethereum, although WisdomTree may direct the custodian company to sell ETH to repay certain expenses.
The ETF will be offered to institutional investors in the form of shares. The price will not only be linked to the value of Ethereum but also to other dynamics such as the demand for the shares, the value of the Trust’s assets and market conditions at that given time.
Investors can buy and sell shares in the Trust through their brokers.
WisdomTree is keen to point out that:
“Investing in the Trust involves risks similar to those involved with an investment directly in ether and other significant risks”.
Why WisdomTree wants to offer an Ethereum ETF
WisdomTree is considering creating an Ethereum ETF to likely intercept the growing demand for ETH from institutional investors.
Indeed, Ethereum’s price rally has attracted considerable attention. And while the debate about Bitcoin’s energy consumption rages on, Ethereum’s switch from PoW to PoS could become not only more competitive, but also more “green”, having a reduced environmental impact.
These reasons are leading to a growth in demand from institutional investors who are more attached to traditional investment instruments such as ETFs.
It will be up to the SEC to decide whether to approve this product, otherwise, different solutions will have to be pursued.