Cardano ETF
A Cardano ETF is an exchange-traded fund that tracks the price of ada, the cryptocurrency of the Cardano blockchain, so that investors can buy it through a securities account. In Europe, ada is available as exchange-traded products (ETPs) that hold the coins in custody, while in the United States a spot ETF needs approval from the Securities and Exchange Commission.
European Cardano ETPs are debt securities backed by physical ada and trade on exchanges such as Xetra and the SIX Swiss Exchange. Some of these products stake their ada and pass staking rewards on to investors through the value of the product.
ETP or ETF: the legal wrapper in Europe
Under the UCITS rules for European funds, a fund must spread its assets, so a product that holds only ada cannot be a UCITS ETF. Issuers therefore use exchange-traded products, which are notes secured by the coins they hold in custody. An ETP trades like a share on a stock exchange, but the investor carries the credit risk of the issuer in addition to the price risk of ada.
21Shares Cardano ETP (AADA)
The 21Shares Cardano ETP launched on April 23, 2021, and has the ISIN CH1102728750 and the ticker AADA. It is fully backed by ada, which Coinbase Custody Trust Company holds, and its issuer 21Shares AG in Zurich charges a product fee of 2.50 percent a year. The product stakes its ada, and the staking yield is added to the net asset value every day.
WisdomTree ETP on Xetra (WADA)
WisdomTree Physical Cardano from WisdomTree has traded on Xetra under the ticker WADA since March 29, 2022, and has the ISIN GB00BNGJ9J32. WisdomTree lists a management fee of 0.50 percent a year, and staking is enabled for the ada that the product holds.
Staking inside an ETP
Staking on Cardano does not lock the coins, because an ada holder delegates stake to a pool and keeps full control of the ada. This makes staking easier to combine with the daily creation and redemption of ETP units than on networks with lock-up periods. Investors who compare staking ETPs look at the share of the rewards that the issuer passes on and at the product fee.
Grayscale Cardano ETF and the US approval
In the United States, Grayscale has filed a Form 19b-4 through NYSE Arca to convert its Cardano Trust into an exchange-traded fund under the ticker GADA. The listing needs a rule change approved by the Securities and Exchange Commission and an effective registration statement. The SEC has not yet published an approval of the Grayscale filing.
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Cardano ETF and Finance Loop
Finance Loop covers exchange-traded crypto products in the Investment & Digital Assets track, where product and custody teams from asset managers and banks meet. Cardano ETPs raise the questions of custody and staking that these teams answer for every physically backed crypto product.
Finance Loop is a professional network and has the goal of driving the institutional use of emerging technologies in finance, such as AI, digital payments, cloud and blockchain solutions. Finance Loop helps its members build skills and personal networks in these fields: Investment & Digital Assets, Payments & Digital Money, Digital Infrastructure & Sovereignty, and Risk & Compliance.