Ethereum ETFs approved in the United States

After a long wait and much speculation, it is now official: ether (ETH) spot ETFs, the native cryptocurrency of the Ethereum network, have been approved by the US Securities and Exchange Commission (SEC).

The securities regulator decided approve all 8 proposed ETFs at the same time (just as it had done in January when it approved bitcoin ETFs). This is to avoid favoring any particular company at the time of launch.

The approved funds are those of the companies VanEck, Ark21Shares, Hashdex, Grayscale, Invesco Galaxy, BlackRock and Fidelity. These ETFs are still waiting for the Securities and Exchange Commission to begin being ‘traded’ on the stock markets. Some forms still need to be completed and delivered by the issuing companies, so that negotiations can begin. The investment funds may be traded on the Cboe, Nasdaq and NYSE stock exchanges.

Investment fund specialist, James Seyffart, explains:

To be clear, this does not mean they will start trading tomorrow. This is just the 19b-4 approval. S-1 documents also need to be approved, which will take time. We expect it to take a couple of weeks, but it could take longer. I should know more in a week or so!

James Seyffart, investment fund specialist.

Also a specialist in investment funds, Eric Balchunas, confirms that “The difficult part is over and now only the logistics remain.” Like Seyffart, he expects there will be only one round of comments left on the S-1 forms. According to him, ether ETFs could perhaps begin trading on stock markets in mid-June. But he clarifies, “it’s just a guess.”

In the following graph, provided by TradingView, it is observed that the price of ETH has reacted with high volatility upon hearing the approval news:

The approval of ETFs based on the Ethereum cryptocurrency took many by surprise. Until last week It was thought that these financial products would be rejected by the SEC. There are questions about whether the regulatory body qualifies ETH as a commodity (commodity) or a security (security).

Everything changed earlier this week when Eric Balchunas announced that confidential sources had told him that the SEC was considering approving ether ETFs. Apparently, Political issues would have been what motivated the SEC’s change of position. Its president, Gary Gensler, has not commented on the matter.

What is said after this victory for Ethereum?

After learning of the approval by the SEC, several issuers of these exchange-traded funds and other relevant players in the cryptocurrency market made statements or publications on their broadcast channels.

Grayscale he wrote on his official X social network account:

«Today, the SEC’s Division of Trading and Markets approved the Grayscale Ethereum Trust’s (ticker: ETHE) Form 19b-4. “We appreciate the opportunity to constructively engage with regulators as they review Ethereum spot ETFs.”

Grayscale, investment fund management company.

VanEckfor its part, published a video titled “Enter the ether”:

Matthew Sigel, Head of Digital Asset Research at VanEck celebrated the measure and indicated that the cryptocurrency ether is a commodity (commodity) decentralized and not a security.

“We applaud this decision, as we believe the evidence clearly demonstrates that ETH is a decentralized commodity, not a security. ETH’s status as a commodity has now been recognized in a variety of circumstances, including CFTC (Commodity Futures Trading Commission) regulation of ETH futures, public statements by Commission officials, rulings of the federal courts and now, we hope, this ETF.

Matthew Sigel, CEO of VanEck.

Paul Grewal, who serves as head of the Legal Office of the cryptocurrency exchange, Coinbase, expressed himself along similar lines. He assured: «ETH is considered, indeed, a commodity (commodity) as we have always known.

Who also gave his opinion on the SEC’s decision was Hunter Horsley, CEO of investment company Bitwise. The executive believes that cryptocurrencies are one of the greatest innovations today and that investors should be close to this type of technology.

«We started Bitwise to give investors exposure to one of the biggest technological innovations in a generation: cryptocurrencies. Days like today reinforce the importance of that mission. It also gives us great hope as we witness the relentless march of cryptocurrencies towards the mainstream. “We look forward to the day when investors can easily access one of the most dynamic assets in cryptocurrencies.”

Hunter Horsley, CEO of Bitwise.

A special mention deserves the company Consensys, software developer and creators of the Metamask wallet. In a statement they explain that they “welcome today’s decision to approve ether spot ETFs as a step in the right direction.” Likewise, they describe the decision as “last minute” and assure that it is “yet another example of the SEC’s problematic ad hoc approach to digital assets.”

No other industry, market or asset is subject to such deliberate regulatory abuse. It is unfair to market participants, contrary to the rule of law and limits innovation. Today’s approval indicates that the SEC considers ETH to be a commodity and not a security, contrary to the position it continued to take prior to this week’s events, as outlined in our recent lawsuit against the SEC. We will continue to fight for definitive regulatory clarity in our case and are pleased to see the tremendous bipartisan effort by Congress seeking to provide clear and sensible regulation.

Consensys, software development company

Why Ethereum ETF Approval Matters?

The approval of ether ETFs marks a significant milestone. As explained in the Cryptopedia (educational section of CriptoNoticias), Spot ETFs, unlike other types of ETFs, are directly backed by the underlying asset, in this case, ether (ETH). This means that the companies issuing these funds must acquire real ether to back the ETFs, rather than simply following the price through futures contracts or other derivatives.

These ether purchases by ETF issuing companies have a great upward potential for the price of the cryptocurrency due to the simple law of supply and demand.

The approval of these ETFs also facilitates the entry of corporate and institutional investors who prefer to operate with instruments regulated by the SEC instead of buying cryptocurrencies directly and keeping them in self-custody wallets. This could significantly increase the amount of institutional capital flowing into the ETH market, just as is currently happening with bitcoin thanks to ETFs.

Updates 5/23/2024: This text was updated to add comments from Seyffart, Balchunas and more details about what happened.

Article written in collaboration with Rafael Gómez, Héctor Cárdenas and Juan Ibarra.