Ethereum ETFs: A New Dawn for Crypto Investments
The recent approval of Ethereum exchange-traded funds (ETFs) has opened the doors for more crypto investment products, according to research from TD Cowen’s Washington Research Group. The speed of approval caught some off guard, but the research group viewed it as an inevitable outcome following the approval of Bitcoin ETFs earlier this year.
Ethereum ETFs: An Early Arrival
Jaret Seiberg, a member of TD Cowen’s team, noted that the Ethereum ETF approval came about six months earlier than expected. This development was predictable after the Securities and Exchange Commission (SEC) gave the green light to crypto futures ETFs. Seiberg further suggested that within the next year, we could see investment offerings that include a “basket of crypto tokens,” encompassing Bitcoin and Ether, and potentially even more.
SEC’s Stance on Cryptocurrencies
However, the approval of Ethereum ETFs does not indicate a broader shift in the SEC’s stance on cryptocurrencies. SEC Chair Gary Gensler, known for his critical stance on the crypto industry, issued a critical statement regarding the passage of crypto legislation that could potentially diminish the agency’s authority. Gensler highlighted the industry’s history of failures, frauds, and bankruptcies, attributing them not to a lack of rules but to many players in the crypto industry disregarding the existing regulations.
His statement was released before the Financial Innovation and Technology for the 21st Century Act, or FIT 21, passed in the U.S. House of Representatives. While Gensler’s agency may face challenges, TD Cowen predicts that the SEC will maintain its Democratic majority until 2026. The research group expects the agency to continue litigating against crypto trading platforms that trade tokens deemed unregistered securities by the SEC.
Spot Ether ETF Approval and Its Implications
The recent approval of spot ETH ETFs potentially confirms Ether’s status as a non-security, according to industry experts. As reported, Bloomberg ETF analyst James Seyffart has said that the approval of these commodity-based trust shares implies that the SEC explicitly recognizes Ether as not being a security. Seyffart further suggested that this recognition could extend to other tokens as well, solidifying their classification as commodities.
Digital asset lawyer Justin Browder echoed Seyffart’s sentiment, stating that if Ether ETFs receive S-1 approval, which is the final requirement for them to begin trading, it would settle the debate once and for all, affirming that ETH is indeed not a security. Adam Cochran, a partner at venture capital firm Cinneamhain Ventures, took the argument a step further, suggesting that this line of thinking could be applied to tokens of other projects as well.
Future Prospects for Ethereum ETFs
On May 23, the SEC officially approved 19b-4 applications from VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise for issuing spot Ether ETFs. Notably, several ETF issuers removed staking from their final amendments. Seyffart predicts that the S-1 approvals could be granted in a “couple of weeks,” although he acknowledges that the process may take longer, typically spanning up to five months. However, fellow Bloomberg ETF analyst Eric Balchunas believes that a mid-June launch is certainly possible.
The approval of Ethereum ETFs marks a significant milestone in the crypto investment landscape, setting the stage for a variety of new investment products that could further legitimize and expand the reach of cryptocurrencies in the financial markets.
