The further mainstreaming of cryptocurrency within the U.S. took one other big step forward on Thursday when the Securities and Exchange Commission approved a rule that clears the way in which for Ethereum exchange-traded funds (ETFs).
Specifically, the SEC approved a rule that might allow spot Ethereum ETFs to trade on U.S. stock markets. Spot Ethereum ETFs are different from the Ethereum ETFs which are in the marketplace now, that are based on futures contracts.
Spot Ethereum ETFs invest directly in ether, the native crypocurrency of the Ethereum blockchain, just as an ETF would a stock. Thus, Ethereum ETFs give investors direct access to ether. Ether is the second-largest cryptocurrency after Bitcoin, trading at around $3,717 per token as of this writing.
This follows the SEC’s approval of spot bitcoin ETFs in January, which took the markets by storm. The 11 spot bitcoin ETFs that were approved have already amassed $12.5 billion in assets.
BlackRock’s iShares Bitcoin Trust is one in all them, and BlackRock CEO Larry Fink recently declared that it’s now the fastest-growing ETF in history.
Eight Ethereum ETFs are coming
The SEC’s ruling said that the proposals are “consistent with the principles and regulations thereunder applicable to a national securities exchange.”
Specifically, it said the proposals are consistent with laws that requires that the exchanges’ rules be designed to “prevent fraudulent and manipulative acts and practices” and, “basically, to guard investors and the general public interest.”
This was the identical evaluation the SEC used to approve spot bitcoin ETFs in January.
This latest ruling paves the way in which for eight recent Ethereum ETFs to trade on the U.S. markets. Specifically, it permits the Grayscale Ethereum Trust and the Bitwise Ethereum ETF to trade on NYSE Arca Exchange.
Moreover, the ruling allows the iShares Ethereum Trust to trade on the Nasdaq and the VanEck Ethereum Trust, the ARK 21Shares Ethereum ETF, the Invesco Galaxy Ethereum ETF, the Fidelity Ethereum Fund, and the Franklin Ethereum ETF to trade on the Cboe BZX Exchange.
“We applaud this decision, as we consider the evidence clearly shows that ETH is a decentralized commodity, not a security. ETH’s status as a commodity has now been recognized in quite a lot of circumstances, including the Commodity Futures Trading Commission (CFTC)’s regulation of ETH futures, public statements by Commission officials, rulings by federal courts, and now, hopefully, this ETF,” said Matthew Sigel, head of Digital Assets Research at VanEck.
What’s next?
While it is a big step, it doesn’t mean the Ethereum ETFs can start trading on the varied exchanges today. Before that may occur, each of the eight ETFs could have to file S-1 Registration statements with the SEC and receive approval before they will officially hit the markets.
That is essentially seen as a formality, but so far as when the S-1 statements are approved, analysts at Bloomberg suggest that it could possibly be a matter of weeks.
TO BE CLEAR: This doesn’t mean they’ll begin trading tomorrow. That is just 19b-4 approval. Also must be an approval on the S-1 documents which goes to take time. We’re expecting it to take a pair weeks but could take longer. Should know more inside every week or so!
— James Seyffart (@JSeyff) May 23, 2024
The value of ether jumped some 27% this week to a high of around $3,932 on Thursday, because the news that the SEC would make this initial approval has been circulating since Monday.
Ether fell about 2% on Friday, perhaps as a result of the conclusion that the ETFs won’t start trading yet or projections from analysts at Goldman Sachs that interest-rate cuts won’t come until a minimum of September.