SEC previous filings and statements from SEC Chair Gary Gensler suggested a likely denial of spot Ether ETF applications. However, the SEC Trading and Markets Division has approved several spot Ethereum exchange-traded funds (ETFs) using delegated authority, rather than a vote by the full commission.
The approval covers 19b-4 filings from major financial institutions, including BlackRock, Fidelity, Grayscale, Bitwise, VanEck, Ark, Invesco Galaxy, and Franklin Templeton. The official order stated, “For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.”
The SEC’s apparent change of heart is leading to speculation about internal dynamics as differing opinions among SEC commissioners or external pressures could be influencing the regulator’s stance.
SEC Chair Gary Gensler’s resistance has been well-documented. His cautious approach aligns with the SEC’s broader mandate to protect investors and maintain fair, orderly, and efficient markets.
The recent shift in the SEC’s position on spot Ether ETFs might indicate shifting power dynamics within the agency ahead of crucial elections in the United States, which may determine the future regulatory framework for crypto as other top jurisdictions are already implementing their own.
SEC is driving surge in ETH price
This unexpected shift has led to significant market activity. Ethereum’s price surged over 20% in a day, marking its largest daily gain in market capitalization. Between 22:46 on May 20 and 00:46 on May 21, Ethereum’s price increased by 17.8%, with trading volume surging to over $21 million, a 618% increase according to the CCIX index for ETH-USD. Open interest in Ethereum trading pairs rose nearly 30% to an all-time high of $13.7 trillion.
For the ETFs to launch, the SEC must approve the S-1 applications. Historically slow in approving Bitcoin and Ethereum ETF applications, the SEC might now be accelerating its review process. If so, Ethereum ETFs could be approved sooner than anticipated.
Nine participants are vying for Ethereum ETFs, including VanEck, ARK/21Shares, and Hashdex. Grayscale has shifted its focus from an Ethereum Futures Trust to converting its existing Ethereum Trust into a spot ETF. BlackRock’s iShares Ethereum Trust faces a third deadline on June 8. Approvals are expected simultaneously, with five ETFs launching on CBOE, and the rest on Nasdaq and NYSE. Coinbase is a popular choice as Ether custodian among six applicants.
Stakeholders initially considered incorporating staking rewards into their ETFs. However, the SEC has decided against allowing staking in the initial ETFs. This decision means entities holding ETH ETFs will miss out on the annual staking yield, currently around 4%. Without staking, significant potential gains are lost over time.
ETF approval is likely to boost interest in the Ethereum ecosystem, increasing network usage and supporting its deflationary status despite expected short-term struggles that may arise from Grayscale Ethereum Trust outflows.
Comments from Coinbase, HANetf, Bitget
A number of crypto industry executives have come forward to comment on the more likely approval of Spot Ether ETFs by the SEC, including professionals from Coinbase, HANetf, and Bitget.
Daniel Seifert, UK Country Director of Coinbase: “Coinbase welcomes this ETF approval and believes it will have a similar, positive impact on the industry, as experienced upon the approval of BTC ETFs. This move solidifies the fact that cryptocurrency is not merely a trend, representing a global transition towards digital assets in order to reshape the existing financial system. The expansion of crypto’s utility will have significant effects on innovation, and we expect to see an escalation of activity in the market. Coinbase is excited to serve asset managers with the full suite of Prime products and further the positive impact on the industry.”
Hector McNeil, Co-Founder and Co-CEO of HANetf, said: “The US Securities and Exchange Commission (SEC) has approved the sale of spot Ether ETFs in the United States. The news had been hotly anticipated, with the price of Ether rising from $3,087 on the 20th May to $3,847 the next day. Given the launch of the first US-listed Bitcoin ETFs back in January, there may have been some that saw the approval of Ether ETFs as inevitable – but there was actually a fair amount of uncertainty in the run-up to the SEC’s latest ruling. It wasn’t until Monday that speculation began to increase that the SEC might opt to approve spot Ether ETFs – many had expected them to reject it. Today’s news, therefore, came as quite a surprise.
“Nonetheless, the decision is yet another tailwind for the cryptocurrency industry, as it increasingly looks to cement itself in the mainstream. For investors in Europe, however, spot crypto exposure is nothing new. ETC Group Physical Bitcoin (BTCE) remains the largest Bitcoin exchange-traded product in Europe, at over $1.4 billion assets under management (AUM). For Ethereum, crypto-experts ETC Group offer two options – ETC Group Physical Ethereum (ZETH), the first Ether product listed on Xetra, as well as their newer ETC Group Ethereum Staking ETP (ET32). The latter product offers exposure to the performance of Ether, while also capturing staking rewards. The US, therefore, has been lagging Europe when it comes to spot crypto exposure. But the news is positive for the industry as a whole, and helps lend further credibility to cryptocurrencies.”
Gracy Chen, CEO of Bitget, stated: “The SEC approved the 19b-4 filing for the Ethereum (ETH) ETF yesterday, marking a significant milestone in the cryptocurrency market. The 19b-4 rule, established by the SEC, is designed to regulate securities traded on exchanges, representing a crucial step in providing investors with a regulated investment channel for Ethereum. However, the ETH ETF still requires approval of the S-1 registration statement, which contains detailed information about the ETF’s structure and management. As a result, the market expects the ETH ETF to be successfully listed within 2-3 weeks at the earliest, or 1-2 months at the latest.
“Core reason: The SEC’s decision is seen as a potential catalyst for increasing Ethereum’s adoption and mainstream acceptance, similar to the impact of the Bitcoin ETF. Currently, during a critical period of the U.S. elections, around 20% of the U.S. population are cryptocurrency users, with both political parties vying to implement policies favorable to cryptocurrency holders to attract voters. The SEC’s 180-degree turn on the ETH ETF also reflects the widespread adoption of crypto assets in the U.S.
“Market impact: The market response has been generally positive. The approval of the 19b-4 filing increases the likelihood of full approval for the ETF, and its subsequent listing on U.S. capital markets is only a matter of time. The price of ETH has risen by nearly 25% over the past seven trading days in anticipation of the approval. With the successful approval of the ETH ETF, it could become a significant buying force for traditional funds to directly purchase ETH. Given ETH’s relatively low market capitalization, the inflow of funds could have a substantial impact, potentially pushing ETH to a new high of $4,800 in the future.
“Industry impact: The approval of the ETH ETF is expected to enhance Ethereum’s credibility and attract more institutional investors, further driving its market value growth and promoting the globalization and widespread adoption of crypto assets.”
