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The SEC has approved spot Ether ETFs, allowing firms like VanEck, BlackRock, and Fidelity to list and trade them, pending final approval of their S-1 registration statements. Bloomberg ETF analyst James Seyffart believes that the S-1 approvals might come within a couple of weeks, though the process could take up to five months. Meanwhile, the House of Representatives recently passed pro-crypto bill H.J.Res.109. President Biden, however, has shared that he plans to veto this bill. The President's decision is expected in the next ten days.
SEC Approves Spot Ether ETFs
The United States Securities and Exchange Commission (SEC) has approved spot Ether exchange-traded funds (ETFs) , following an earlier landmark decision in January that approved spot Bitcoin ETFs. The SEC's approval now allows firms like VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise to list and trade spot Ether ETFs on their respective exchanges.
Despite this approval, the ETF issuers still require the SEC's sign-off on their S-1 registration statements before the spot Ether ETFs can officially begin trading. This final approval process could take days, weeks, or even months.
The SEC has been actively investigating whether to classify Ether as a security, which certainly added a layer of complexity to the approval process. On May 20, the SEC instructed applicants to accelerate their 19b-4 filings, which led to the recent approvals.
The SEC has not yet approved Hashdex’s spot Ether ETF application, which has a final deadline set for May 30. It is still unclear if Hashdex's application will eventually receive approval.
After the SEC's announcement, the price of ETH jumped to over $3,900. However, at press time, the price of the altcoin slightly dropped to $3,802.18.
Spot ETH ETFs Could Launch by Mid-June
The newly-approved spot ETH ETFs could launch as early as mid-June if they follow a timeline similar to the spot Bitcoin ETF process. Bloomberg ETF analyst James Seyffart believes that the S-1 approvals might come within a couple of weeks, though the process could take up to five months.
Fellow Bloomberg analyst Eric Balchunas agreed that a mid-June launch is very possible. He also expects there to be only one round of comments to the S-1 amendments, also similar to the spot Bitcoin ETF process. VanEck has already filed its amended S-1, and other applicants are expected to follow suit very soon.
Gabriel Shapiro of Delphi Labs pointed out that the SEC's approval was made by its Division of Trading and Markets under delegated authority. This means that one of the five SEC Commissioners could challenge the decision within ten days. However, digital asset lawyer Joe Carlasare believes that a challenge is very unlikely as the approval would not have been passed without knowing there was no opposition from any Commissioner.
Seyffart agrees with this, and also pointed out that decisions made with delegated authority are actually pretty common practice and that a review would likely not change the approvals.
If the S-1s are approved, Seyffart expects spot Ether ETFs to capture 20% of the flows seen by spot Bitcoin ETFs, while Balchunas estimates a smaller range of 10-15%. Spot Bitcoin ETFs have seen $13.3 billion in net inflows since their launch about four and a half months ago. Capturing 20% of that figure would mean spot Ether ETFs could see a combined $2.66 billion over the same period.
On the other hand, there are some concerns that the spot Ether ETF market could could see big outflows from the Grayscale Ethereum Trust that was converted into spot ETF form. This was the case seen with Grayscale's converted Bitcoin ETF.
VanEck Celebrates Spot Ether ETF with Viral Ad
Asset manager VanEck was very quick to celebrate its newly-approved spot Ether ETF with a 37-second advertisement titled "Enter the ether." The ad was posted to X on May 23, just about 30 minutes after the SEC approved its 19b-4 filing for a spot Ether ETF. The advertisement already received more than 1,100 reposts and 320,000 views, and has gotten mostly positive reactions online.
Colin Goltra, operating chief of Yield Guild Games, praised the commercial, while the anonymous co-founder of DeGods private club X+ "Mav" pointed out that it will help older generations understand the broader applications of crypto beyond just digital gold. Andrew Thurman from Jito Foundation humorously described the ad's target audience as someone with eclectic life experiences.
VanEck previously released a very similar series of advertisements in late September for its Ethereum Strategy ETF that launched on Oct. 2. The other asset managers who received 19b-4 approvals have not released any advertisements.
What are Spot ETH ETFs?
A spot ETH ETF offers investors a way to gain exposure to ETH without directly buying or holding the cryptocurrency. Unlike futures-based ETFs that derive value from contracts speculating on ETH's future price, spot Ethereum ETFs track the real-time price of ETH by holding the actual cryptocurrency in their reserves.
This structure simplifies access to ETH, though it still comes with some risks and limitations, like potential additional fees and the restriction of trading to market hours, contrasting with the 24/7 nature of crypto markets.
A spot Ethereum ETF is designed similarly to traditional ETFs, where managing institutions purchase and hold ETH in their reserves to mirror its value. Listed on a stock exchange, investors can buy and sell shares in the ETF, representing ownership of the underlying ETH held by the fund. This provides a regulated financial instrument for gaining exposure to ETH's price movements.
Some of the key benefits of spot Ethereum ETFs include convenient exposure, as they lower the barrier to entry for traditional finance traders and investors by eliminating the need for direct interaction with crypto exchanges and wallets. They also offer risk management, as some investors may see them as less risky than storing crypto directly. Additionally, ETFs provide liquidity by being traded on stock exchanges, allowing easy buying and selling throughout the trading day.
Biden's Veto Looms
Now that ETH ETFs are approved, all eyes turn to the White House. This week, the House of Representatives passed two pro-crypto bills, however, President Joe Biden may veto one of the key pieces of legislation that has already received a lot of support from industry advocates.
The House presented a joint resolution to the President, urging the SEC to nullify a rule that impacts financial institutions dealing with crypto firms. The bill, H.J.Res.109, would overturn the SEC’s Staff Accounting Bulletin No. 121, that requires banks to include customers’ crypto assets on their balance sheets with capital maintained against them.
Despite the huge amount of support for the resolution in both the House and the Senate, President Biden made it clear that he plans to veto it. He argued that the bill will limit the SEC’s ability to implement appropriate regulations and address future crypto-related issues. On May 8, 21 House Democrats joined Republicans to pass H.J.Res.109, and on May 16, the Senate followed suit with a 60 to 38 vote.
Additionally, the House recently passed the Financial Innovation and Technology for the 21st Century (FIT21) Act, which President Biden also opposed, though he did not explicitly threaten a veto.
Former Biden administration official Moe Vela believes that the Biden administration and the crypto industry have to work together to develop consumer-friendly and industry-supportive regulations. He also urged the President not to veto H.J.Res.109
The President now has ten days, excluding Sundays, to decide whether to sign or veto the bill.
