Bitwise files with SEC to launch first Uniswap ETF

Bitwise is now closer to the official launch of the first exchange-traded fund (ETF) dedicated to Uniswap, following its SEC filing. The suggested Bitwise Uniswap ETF gives investors access to UNI, the native token of the Uniswap protocol, via traditional investment options. 

If successful, such an ETF would be a pivotal moment for decentralized finance (DeFi), bringing one of the world’s best-known decentralized exchange tokens to mainstream financial markets. 

Bitwise, a leading crypto asset management company, filed the application on Thursday as part of its efforts to develop a new ETF that would track the value of UNI. Under an ETF, its primary purpose, as stated in the company’s registration statement, is to give investors exposure to the value of the UNI tokens the fund holds, along with operating and other costs. UNI is the governance token for Uniswap, a decentralized Ethereum blockchain exchange.

Uniswap is among the world’s biggest decentralized exchanges, meaning people can move virtual currencies directly without banks or any central trading platform. Uniswap differs from mainstream exchanges in its use of smart contracts to automate trading.

Coinbase Custody Trust Company would act as custodian if the ETF were allowed. Coinbase would securely hold the UNI tokens on behalf of the ETF. Bitwise added that staking would not be part of the ETF launch. 

Crypto ETFs continue expanding amid regulatory changes

The Bitwise filing comes amid a period of rapid growth for crypto ETFs. These applications and launches on digital assets have increased markedly since 2021. This expansion has been accompanied by a better regulatory and political climate in the U.S. 

U.S. President Donald Trump has repeatedly claimed he seeks to make the U.S. the “crypto capital” of the world. His administration is providing greater support for digital asset innovation, leading financial companies to create new crypto investment products. 

Meanwhile, the SEC and the Commodity Futures Trading Commission (CFTC) are beginning to coordinate more closely to update outdated crypto regulations. SEC Chair Gary Gensler and CFTC Chair Rostin Behnam recently introduced “Project Crypto,” for instance, a movement to modernize existing financial regulations to better accommodate digital assets and blockchain. 

These changes have helped build greater trust among institutional investors. More and more large asset managers view crypto ETFs as a safe way to introduce digital assets into traditional capital markets. ETFs are particularly appealing because they enable investors to gain exposure to cryptocurrency without having to invest in or manage tokens themselves. 

Bitwise has also introduced several crypto-investment vehicles, such as ETFs linked to Bitcoin and other digital assets. The new Uniswap ETF would bring additional benefits in what is still a nascent decentralized finance sector, far less mature than Bitcoin and Ethereum.

Market volatility highlights risks and opportunities

The filing of an ETF is emerging amid immense volatility in the crypto market. UNI’s price slumped roughly 15% over the past 24 hours, a marker of a wider decline among digital asset peers. 

Bitcoin, the leading cryptocurrency, also declined, tumbling nearly 15% on the day. These price moves illustrate how quickly crypto markets can shift. ETFs can help investors gain a foothold in crypto more quickly, but they do not eliminate the risk of price volatility. 

But ETFs offer more stability over time, some analysts say. ETFs are supposed to increase liquidity and reduce the extreme price effects by encouraging more institutional investors to participate (i.e., pension funds and investment firms). The proposed Bitwise Uniswap ETF illustrates the nascent trend of growing interest in decentralized finance. 

DeFi services such as Uniswap have transformed the way people buy and control digital assets, removing middlemen. They are built on blockchain technology so that individuals can participate in financial transactions directly, without using traditional intermediaries such as banks and lenders. 

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