What did we learn from BlackRock’s Ethereum SEC S-1 filing today?

BlackRock, the world’s largest asset manager, has filed its S-1 registration statement and prospectus with the Securities and Exchange Commission (SEC) for the anticipated Ethereum exchange-traded fund (ETF).

Quick Take

• BlackRock’s Ethereum ETF will be called the iShares Ethereum Trust and will directly hold Ethereum.
• Coinbase Custody Trust Company is named as the custodian for Ethereum.
• An unnamed custodian will hold cash.
• The ETF seeks to track the price of Ethereum before fees and expenses.
• The NAV will be calculated using the CME CF Ether-Dollar Reference Rate index.
• The sponsor has discretion on how to handle forks, airdrops, and can abandon assets from these events.
• The management fee was left blank in the current filing, along with additional expenses.
• Ethereum will be sold periodically to cover fees, creating tax events.
• The ETF plans to list on the Nasdaq under an unnamed ticker.
• No launch date is provided.

BlackRock Ethereum ETF breakdown.

According to the filing, the proposed ETF will be called the iShares Ethereum Trust and will track the price of Ethereum, the native cryptocurrency of the Ethereum blockchain. The ETF will be structured as a grantor trust and hold Ethereum on behalf of investors. The trust will issue shares representing fractional undivided beneficial interests in its net assets, consisting primarily of Ethereum. The filing states the ETF seeks to reflect the performance of the Ethereum price before fees and expenses.

The sponsor of the proposed ETF is iShares Delaware Trust Sponsor LLC, a subsidiary of BlackRock. Key service providers named in the filing include BlackRock Fund Advisors as the trustee, Coinbase Custody Trust Company as the custodian for Ethereum holdings, and an unnamed custodian for cash holdings.

BlackRock outlined several benefits of investing in the ETF compared to direct ownership of Ethereum. These include avoiding the complexities of digital asset wallets and keys, the convenience of trading through traditional brokerage accounts, and the continuous creation and redemption of ETF shares.

According to the prospectus, the ETF’s net asset value (NAV) will be calculated daily using the CME CF Ether-Dollar Reference Rate index published by CF Benchmarks. This benchmark index aggregates trading activity across major Ethereum spot exchanges between 3-4 pm ET to produce a reference rate for Ethereum. The filing also discussed how the ETF will handle network forks, airdrops, and other events that may entitle it to new assets. As reported, the sponsor has discretion over whether to claim or abandon these assets. Abandoned assets will not be reflected in the ETF’s net asset value.

On expenses, BlackRock stated the ETF would have a currently undisclosed management fee and additional operating expenses. The trust will periodically sell Ethereum to cover fees, creating taxable events for shareholders.

On listing, BlackRock intends to list the ETF on Nasdaq under an unnamed ticker and will continuously issue shares to authorized participants in exchange for Ethereum deposits. The filing did not provide a planned launch date for the ETF.

Overall, the prospectus provides insights into the structure and mechanics of BlackRock’s proposed Ethereum ETF. As a major financial player, an Ethereum ETF from BlackRock could significantly impact institutional adoption and trading volumes if approved by the SEC. However, the regulatory environment remains uncertain, with several Bitcoin ETF applications still pending approval.