Franklin Templeton, one of the world’s largest asset managers with $1.5 trillion in assets under management, has filed for a spot exchange-traded fund (ETF) that would track the performance of bitcoin.
The fund, named Franklin Templeton Spot Bitcoin ETF, would invest in bitcoin directly through a custodian and would seek to reflect the price movements of the cryptocurrency, according to the filing with the US Securities and Exchange Commission (SEC) on Monday.
The filing comes as the SEC is reviewing several applications for bitcoin ETFs, which are seen as a potential catalyst for wider adoption and institutional demand for the digital asset. So far, the regulator has not approved any bitcoin ETFs in the US, citing concerns over market manipulation, fraud and investor protection.
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Franklin Templeton said it believes that its proposed ETF would address some of the SEC’s concerns by providing investors with exposure to bitcoin in a regulated and transparent manner. The fund would use the CF Bitcoin US Settlement Price as its benchmark index, which is calculated by Crypto Facilities Ltd, a subsidiary of Kraken, one of the largest cryptocurrency exchanges.
The CF Bitcoin US Settlement Price is a daily benchmark that reflects the average price of bitcoin transactions across major spot exchanges. It is published by Crypto Facilities, a UK-based crypto derivatives platform that is regulated by the Financial Conduct Authority. Crypto Facilities is also the provider of the CME CF Bitcoin Reference Rate, which is used by the Chicago Mercantile Exchange (CME) to settle its bitcoin futures contracts.
The CF Bitcoin US Settlement Price is calculated using a volume-weighted median of the trade prices on five spot exchanges: Bitstamp, Coinbase, Gemini, itBit, and Kraken. The median is taken from a 12-hour window that spans from 3:00 p.m. to 3:00 a.m. London time. The price is denominated in US dollars and rounded to the nearest cent.
The CF Bitcoin US Settlement Price is important for traders because it determines the final value of the bitcoin futures contracts that are listed on Crypto Facilities and other platforms that use its data. For example, if you buy a bitcoin futures contract that expires on September 30, 2023, you will receive or pay the difference between the contract price and the CF Bitcoin US Settlement Price on that date. This means that you need to monitor the spot market movements and the CF Bitcoin US Settlement Price to manage your risk and profit potential.
The CF Bitcoin US Settlement Price is also used as a reference price for other crypto derivatives products, such as options, swaps, and perpetuals. It provides a reliable and transparent benchmark that reflects the true market value of bitcoin across different venues. By using this price, traders can avoid manipulation, arbitrage, and slippage that may occur on individual exchanges.
The fund would also employ various risk management and security measures, such as using multiple custodians to hold the fund’s bitcoin, conducting regular audits and reviews of the custodians’ operations and security protocols, and implementing policies and procedures to prevent unauthorized access, theft or loss of the fund’s assets. The filing did not disclose the fees, ticker symbol or listing exchange for the fund. Franklin Templeton said it would provide more details in subsequent filings.
The fund would be the first bitcoin ETF sponsored by a major asset manager, which could boost its chances of approval by the SEC. However, it would also face competition from other bitcoin ETFs that have been filed by smaller firms or that use different strategies to gain exposure to the cryptocurrency. For example, some bitcoin ETFs would invest in bitcoin futures contracts instead of spot bitcoin, which could reduce some of the risks and costs associated with holding and storing the digital asset.
Therefore, investors who are interested in investing in a bitcoin ETF should carefully compare the features and benefits of each fund before making a decision.