In a landmark decision, the U.S. Securities and Exchange Commission (SEC) has approved eight spot Ethereum ETFs, paving the way for Ethereum trading on Wall Street. This approval comes just months after spot Bitcoin ETFs received the SEC’s nod, marking a significant shift in the regulatory landscape for cryptocurrencies.
The newly approved funds include the converted Grayscale Ethereum Trust, Bitwise Ethereum ETF, iShares Ethereum Trust, VanEck Ethereum Trust, ARK/21 Shares Ethereum ETF, Invesco Galaxy Ethereum ETF, Fidelity Ethereum Fund, and Franklin Ethereum ETF. This move represents a dramatic reversal from the SEC’s previous stance, signaling a more favorable outlook towards Ethereum.
Timeline for Trading
Although the approval is in place, trading will not commence immediately. According to Bloomberg ETF expert James Seyffart, it may take a “couple weeks” before the necessary S-1 documents are processed, enabling fund managers to begin trading. This development comes as a surprise to many financial experts and crypto industry leaders who, until recently, deemed such an outcome unlikely. The SEC had given little indication of moving forward with any spot ETH ETF applications before the critical May 23 deadline.
Legal Context and Implications
Adding to the unexpected nature of this approval is a recent lawsuit filed by Ethereum software company Consensys against the SEC. The lawsuit alleged that the SEC had considered ETH an unregistered security for over a year. Had the SEC formally classified ETH as a security, the approval process for Ethereum ETFs would have been significantly more complex. By approving the spot ETH ETFs, the SEC has implicitly acknowledged that ETH is not a security, which is a considerable win for the crypto community. Ethereum is fundamental to the blockchain ecosystem, supporting numerous key projects and services.
Strategic Adjustments by ETF Issuers
In a strategic move to secure approval, several ETH ETF issuers modified their applications to exclude references to staking customer ETH. Since Ethereum’s transition to a proof-of-stake model in September 2022, ETH holders have been able to earn rewards by depositing their funds. The SEC has long viewed staking services offered by financial intermediaries as potentially unregistered securities schemes. Spot Ethereum ETFs differ from ETH futures ETFs, which track derivatives contracts. These spot ETFs involve issuers directly buying and holding ETH for their clients, allowing traditional investors to gain exposure to ETH without owning the cryptocurrency directly.
Impact on the Financial Market
This historic approval follows the SEC’s green light for eleven spot Bitcoin ETF applications in January, which have since attracted nearly $13 billion in net inflows. Cody Carbone, Chief Policy Officer at the crypto lobbying group Digital Chamber of Commerce, compared this milestone to an initial public offering (IPO) for Ethereum, calling it a significant endorsement of the cryptocurrency’s legitimacy.
The SEC’s decision marks a pivotal moment for Ethereum and the broader cryptocurrency market, potentially attracting substantial institutional investment and further integrating digital assets into the traditional financial system.
