Regulator Greenlights Groundbreaking Hybrid FundsThe U.S. Securities and Exchange Commission (SEC) has taken a pivotal step in the cryptocurrency sector, approving the first hybrid Bitcoin-Ethereum exchange-traded funds (ETFs). After prolonged review processes stretching back to June, the agency authorized Nasdaq and Cboe BZX Exchange to list these dual-asset funds, marking a significant milestone for digital asset investment products.The newly approved products, the Hashdex Nasdaq Crypto Index US ETF and the Franklin Crypto Index ETF, will allocate assets between Bitcoin and Ethereum based on free-float market capitalizations. According to filings, the funds are expected to launch in January 2024, with an estimated split of 80% Bitcoin and 20% Ethereum, reflecting the current dominance of Bitcoin in the market. Senior Bloomberg ETF analyst Eric Balchunas highlighted this allocation as a likely benchmark for similar products in the future.Compliance and transparency are central to the funds' operations, aligning with SEC standards. Both exchanges will ensure adherence to strict listing requirements, with mechanisms in place to delist the ETFs if necessary. The funds will provide real-time updates of their intraday indicative values every 15 seconds during market hours, ensuring investors have continuous access to critical data. Additionally, trading activities will fall under existing equity securities regulations, adding a layer of oversight to mitigate risks.The approval arrives amid a dynamic phase for crypto ETFs, with notable players like BlackRock dominating the existing Bitcoin ETF market. BlackRock’s IBIT holds $56 billion in assets under management (AUM), generating over $4.4 billion in trading volume, while Fidelity’s FBTC and Grayscale’s GBTC trail with around $20 billion in AUM each. Despite the buzz, Coinglass data shows net outflows of approximately $671 million across major crypto funds on December 19, hinting at mixed market sentiment.The SEC’s decision underscores growing confidence in dual-asset frameworks for crypto ETFs, a stark departure from its prior preference for single-asset exposure. The approval builds on surveillance-sharing agreements that facilitate real-time data exchange between exchanges to prevent fraud and manipulation. These safeguards, coupled with established correlations between crypto products and CME futures, were pivotal in meeting the regulator’s stringent standards.Industry observers, including Nate Geraci of the ETF Store, see significant demand for these hybrid products. Diversification appeals to advisors and investors exploring the emerging crypto space. However, Geraci speculated whether other issuers might follow Franklin Templeton and Hashdex’s lead in launching similar products, given the SEC’s newfound openness to dual-asset ETFs.This article has been refined and enhanced by ChatGPT.