The US’ Securities and Exchange Commission (SEC) has approved the listing and trading of eight exchange-traded funds (ETFs) backed by spot Ether, the native cryptocurrency of the Ethereum blockchain.
This landmark ruling, announced in May 2024, marks a significant shift in the SEC’s stance towards the regulation of cryptocurrencies and sets the stage for increased institutional investment in the Ethereum ecosystem.
The SEC’s approval of these Ether ETFs followed a thorough review process, during which the regulatory body carefully examined the proposals submitted by various exchanges, including NYSE Arca, Nasdaq, and Cbose BZX Funds.
The Commission found that the proposals were consistent with the rules designed to “prevent fraudulent and manipulative acts and practices” and, “in general, to protect investors and the public interest.”
Factors Influencing the SEC’s Decision
Several key factors contributed to the SEC’s decision to greenlight the Ether ETFs.
Firstly, the Commission took into account the robust and regulated futures market for Ether, which provided a strong basis for the pricing and valuation of the underlying asset. A
dditionally, the removal of staking features from the ETF proposals, in response to the SEC’s concerns about the potential classification of staking as an unregistered security, played a pivotal role in the approval process.
The SEC’s order grants approval for the listing and trading of eight Ether ETFs, including:
- Grayscale Ethereum Trust
- Bitwise Ethereum ETF
- BlackRock’s iShares Ethereum Trust
- VanEck Ethereum Trust
- ARK 21Shares Ethereum ETF
- Invesco Galaxy Ethereum ETF
- Fidelity Ethereum Fund
- Franklin Templeton’s Franklin Ethereum ETF.
Impact on Ether Prices and Institutional Adoption
The SEC’s decision has had a significant impact on the Ether market, with the cryptocurrency experiencing a surge in price leading up to the announcement.
Ether traded as high as $3,960 on the day of the approval, reflecting the anticipation and excitement surrounding the launch of these new financial products.
The approval of Ether ETFs is expected to have far-reaching implications for the Ethereum ecosystem. By providing a more accessible and regulated investment vehicle, these ETFs will likely attract a wider pool of institutional investors, potentially driving increased liquidity and broader adoption of Ether and the Ethereum network.
Comparison to Bitcoin ETFs
The Ether ETFs are expected to be smaller in size, at least initially, compared to their Bitcoin counterparts, which have already attracted over $12 billion in net inflows since their launch less than six months ago.
However, Ethereum enthusiasts are hopeful that the Ether ETFs will see comparable levels of interest from traditional finance investors.
Nevertheless, the SEC’s approval of the Ether ETFs is seen as a sign of a softening stance towards cryptocurrency regulation. The decision comes after a series of legal battles, including the SEC’s loss against Grayscale in a lawsuit that spurred the approval of Bitcoin ETFs.
Staking Exclusion and its Implications
One notable aspect of the approved Ether ETFs is the exclusion of staking features, a mechanism that allows Ethereum users to earn rewards by locking up their Ether holdings to help secure the network.
This decision was made in response to the SEC’s stance that staking-as-a-service offerings may be considered unregistered securities.
The lack of staking opportunities in the Ether ETFs may dampen the appeal of these products for some investors, as staking has become an integral part of the Ethereum ecosystem.
Additionally, the ETFs may not provide the same level of exposure to the broader Ethereum network and its decentralized applications (dApps) as direct Ether ownership.
