Several applications have been submitted for Ethereum exchange-traded funds with the U.S. Securities Exchange Commission (SEC), and the decision for approving or denying the products has been pushed back, aligning with analyst expectations.
Unsurprisingly, on Monday, the SEC delayed a decision to approve the BlackRock spot Ethereum ETF. The SEC now has until May 23 to approve or reject VanEck’s ETF application for an Ethereum ETF tracking the world’s second-largest cryptocurrency.
In January, the SEC approved almost a dozen Bitcoin spot ETFs, sparking a trading frenzy as demand for the products continues to accelerate. Among the eleven Bitcoin spot ETFs approved is the BlackRock iShares Bitcoin Trust, trading under the ticker symbol “IBIT.” BlackRock’s ETF has been a frontrunner, attracting $10 billion in assets under management (AUM) in just under two months since its launch.
Many product providers are optimistic about the approval of more crypto products, believing it is inevitable that the SEC will eventually approve Ethereum ETFs due to the growing demand.
“I think it is inevitable Ether is next,” Hector McNeil, co-CEO and co-founder of HANetf, a firm that markets and distributes exchange-traded products, told Cryptonews. “If Bitcoin can be approved and meets all the liquidity and asset class thresholds, then Ether qualifies,” adds McNeil.
In Europe, several issuers have successfully listed numerous cryptocurrency exchange-traded products (ETPs) years ago, providing investors with exposure to Bitcoin and Ethereum. Crypto ETP providers in Europe include CoinShares, 21Shares, WisdomTree, ETC Group, Valour, and Fidelity.
“We already have these [ETH ETFs] in Europe; we have over $130 million AUM in ETC Group’s Physical Ethereum ETP, trading under the ticker symbol ZETH, and it has been in the market for over four years,” explains McNeil from HANetf.
According to CoinShares, a European asset manager specializing in digital assets, in the U.S., the term “ETF” has become the default term for all exchange-traded products that aim to replicate the performance of an underlying asset or benchmark.
“In Europe, due to specific fund regulations, the term ‘ETF’ cannot be used for single assets like bitcoin, gold, or smaller baskets of assets. This regulatory distinction means that when European investors search for a ‘crypto ETF,’ they should be searching for a ‘crypto ETP’ instead,” explains CoinShares on its website.
In February, CoinShares announced that investors of the Europe-listed CoinShares Physical Ethereum ETP (ticker: ETHE/CETH) can earn a 1.25% staking reward per year.
It’s worth noting that the U.S. has regulated futures products that give investors exposure to Ethereum, approved and regulated by the Commodity Futures Trading Commission (CFTC).
“The remarkable success of BTC ETFs, coupled with the existing CFTC-regulated ETH futures trading on CME, paints a compelling picture for an imminent ETH ETF,” Chanchal Samadder, head of product at ETC Group, told Cryptonews in an email.
“The market’s leading ETF issuers have filed applications, signaling their confidence in this development. While the SEC’s stance on whether ETH qualifies as a security remains uncertain, the undeniable momentum, driven by institutional investor demand, makes a strong case for approval,” said Samadder.
One challenge highlighted by Samadder is that a primary attraction of ETH for institutional investors lies in its staking yield. For many investors, staking is a way of earning rewards by simply holding Ethereum.
“We anticipate that staked ETH ETFs will face delays in approval in the U.S., unlike Europe, where these products are readily accessible to investors,” adds Samadder.
The SEC’s decision to delay indicates a cautious approach towards cryptocurrency ETFs as the regulator assesses all the risks and regulatory considerations associated with the products. It took over ten years to approve a Bitcoin spot ETF. Back in July 2013, the Winklevoss twins first filed for a Bitcoin ETF, but it was rejected repeatedly.
In conclusion, the road to Ethereum ETF approval is paved with regulatory challenges, market dynamics, and investor demands. As the crypto landscape evolves, the approval of Ethereum ETFs in the U.S. remains a topic of great interest and anticipation.