The financial environment shifted when Franklin Templeton started a fee war by declaring the fees for its spot Ethereum ETF. This aggressive move was through an Amended S-1 application which is a huge step in the world of competing Cryptocurrency ETFs.
On 31st May, American multinational investment firm Franklin Templeton submitted an S-1 amendment to its proposed spot Ether (ETH) exchange-traded fund (ETF). This ETF will mimic the price movement of Ethereum, an emerging cryptocurrency that is currently priced at around $3,780. The firm disclosed that the annual sponsor fee for their ETF would be 0.19% of the fund's net asset value, arising daily.
This announcement was first broken by Bloomberg ETF analyst Eric Balchunas who revealed Franklin Templeton’s intention to aim for market dominance in the rising field of cryptocurrency ETFs.
Balchunas highlighted that this fee structure is similar to that of Franklin's spot Bitcoin ETF, revealing that this rate is likely to be a permanent fixture rather than a temporary introductory offer. The importance of this move can be seen in the fact that there are usually people who are interested in investing in ETFs that are cheap in terms of fees.
It is not a new phenomenon to talk about fee war in the ETF market. The strategic moves and changes are important to attract investors in the ETF market. Lower fees can significantly increase the appeal of an ETF since fees have a direct effect on the net returns.
When Franklin Templeton announced its fees, it created pressure on other firms like VanEck, Invesco, and Galaxy which had also filed S-1 applications but had not yet disclosed their fee structures.
In the past, fee wars were seen in the introduction of spot Bitcoin ETFs at the beginning of the year. Firms revised the S-1 filings numerous times to alter fees, and some even decided to forego fees for a particular period to get ahead of competitors. For example, Bitwise did not charge any fees on its spot Bitcoin ETF for the first half a year of trading and the first $1 billion of assets. This is a competitive pricing strategy that is used to attract early investors and also to gain a big market share.
The recent announcement of Franklin Templeton leaves a deep impact on the cryptocurrency market. It has created a template that other ETF providers will need to take into account, which may result in a series of fee cuts or pricing wars.
Such fee disclosures can also improve investors’ confidence as they ensure transparency and clarity in the cost structures. Furthermore, this fee war could also enable the approval and listing of other spot Ether ETFs as firms strive to complete their products for investment.
Balchunas even predicted that there could be a possibility that spot Ether ETF could be launched before the end of June this year. This could lead to more people investing in Ethereum and other cryptocurrencies which would improve the values of these markets and the overall liquidity.
CoinGabbar concluded that Franklin Templeton’s spot Ethereum ETF fee disclosure for its ETF has triggered a fee war in the ETF market similar to the Bitcoin ETF fee changes. The strategy of setting an annual fee of 0.19%, Franklin Templeton not only manages to place itself in a favorable position but also puts pressure on other providers that offer similar services. This may be expected to help investors in the long run by cutting costs and increasing the availability of information and in the short term, could lead to the creation of more spot Ether ETFs. Thus, Franklin Templeton’s action will be a big step forward in the development of this segment.
Also Read: Spot Ether ETF Approval Brings A New Era In Crypto Industry
