New SEC Rules Pave the Way for Altcoin ETFs: Franklin Takes the Lead

The new regulations approved by the SEC have opened avenues for cryptocurrency exchange-traded funds (ETFs) to include a wider variety of altcoins. Franklin Templeton is the first major player to respond, expanding its Franklin Crypto Index ETF to include popular altcoins. This move highlights the growing interest in altcoin ETFs and presents new investment opportunities.

Key Takeaways

The SEC has approved a new rule allowing crypto ETFs to hold a broader range of tokens, as long as these tokens are in their benchmark index.
Franklin Templeton plans to expand its Franklin Crypto Index ETF to include XRP, Solana, and Dogecoin, alongside Bitcoin and Ethereum.
The ETF will rebalance its portfolio quarterly and allow for in-kind creation and redemption using actual digital assets.
Market reactions show an evolving interest in altcoins, indicating a potential shift in investor strategies from traditional Bitcoin and Ethereum holdings.

New SEC rules open the door for altcoin ETFs: Franklin moves first

Franklin Templeton Expands Its Altcoin ETF Options

Starting December 1, Franklin Templeton will track an enhanced selection of digital assets in its fund. The firm's decision to expand follows new regulations adopted by the Cboe exchange, which were greenlit by the U.S. SEC. These rules now permit crypto-linked ETFs to include a more extensive range of tokens, provided they are featured in the fund's benchmark index.

New Additions to the Altcoin Portfolio

As per the new guidelines, the updated ETF will include notable altcoins such as Ripple (XRP), Solana (SOL), Dogecoin (DOGE), Cardano (ADA), Stellar (XLM), and Chainlink (LINK). The amounts of these tokens will be determined by the index provider, ensuring the ETF accurately reflects its benchmark instead of relying on the fund issuer's discretion. Additionally, the fund will undergo rebalancing every three months, allowing it to adjust its holdings in response to market dynamics or index changes.

Market Activity and Its Implications

Franklin’s decision to expand comes shortly after the launch of its XRP product, the XRPZ trust, which features a sponsor fee of 0.19%. Meanwhile, Grayscale has also entered the market with its GXRP ETF, offering it with zero fees, highlighting the growing competition in the altcoin ETF space.

As of now, XRP is trading at $2.24, marking an increase of 8.61% over the previous 24 hours. Solana has risen to $137.79, a gain of 5.54%, while Dogecoin has climbed to $0.1507, experiencing a 3.01% increase, according to CoinMarketCap. Despite this positive momentum for some altcoins, ETF flow data presents a mixed narrative.

Franklin Templeton's Bitcoin (BTC) and Ethereum (ETH) ETFs drew zero flows on November 21 and 24, indicating low investor interest in its flagship products. Grayscale's BTC ETF also reported zero flows on November 24, but saw $61.5 million in inflows on November 21. Moreover, while Grayscale’s Ethereum Fund remained flat on both days, another one recorded inflows of $7.7 million on November 21 and $9.8 million on November 24. In contrast, Solana's Grayscale ETF, GSOL, attracted $1.14 million on November 21 and $4.7 million on November 24.

The Evolving ETF Landscape

All these recent moves—filings, new product launches, and varied market responses—reflect a changing landscape in the ETF market where Bitcoin and Ethereum no longer dominate the conversation. Despite stable flows in traditional cryptocurrencies, the ongoing interest in altcoin ETFs suggests that investors may be diversifying their portfolios to include a wider range of digital assets as market volatility continues to fluctuate.