Ether ETF Approval in U.S.: Hopes High but Regulatory Hurdles Persist
Summary:
The U.S. Securities and Exchange Commission (SEC) approved 10 spot Bitcoin exchange-traded funds (ETFs) in January. The attention has now shifted to Ether (ETH) ETFs, with major financial institutions applying and the final deadline approaching in May. While experts are divided on whether an Ether ETF will be approved in 2024, high institutional interest drives optimism. However, varying views within the SEC on the categorization of cryptocurrencies could pose a potential roadblock.
On January 10, the U.S. Securities and Exchange Commission (SEC) endorsed 10 Bitcoin exchange-traded funds (ETFs) for spot trading. This encourages U.S. investors to pursue Bitcoin-related financial instruments. Since its debut on the exchange on January 11, these funds have drawn in billions of dollars. It also marks a significant instance in the lifespan of Bitcoin following numerous rejections in the past. The focus has now shifted towards Ether (ETH) ETFs, which face their final submission deadline in May.
Just like Bitcoin ETFs in 2023, top financial organizations including BlackRock, ARK Invest, Fidelity, Invesco Galaxy and others have submitted requests for an Ether ETF. Ark took the first step in September 2023 and was later followed by BlackRock and others. The SEC has repeatedly shelved its determination on Ether ETFs, mirroring a history of numerous postponements on Bitcoin ETF approval decisions.
As the ultimate date closes in, differences exist among ETF experts and the cryptocurrency followers on whether or not an Ether ETF will get the green light in 2024. On one side, James Seyffart, a Bloomberg ETF analyst, is of the opinion that the SEC recognized Ether as a commodity after Ethereum futures ETFs were given the go-ahead, and thus an approval for an Ether ETF is only a matter of time. Senior Bloomberg analyst Eric Balchunas estimates there is a 70% probability that an Ether ETF will be authorized by May.
On the contrary, CEO of Morgan Creek Capital, Mark Yusko provides less than half chances for a U.S. approval of Ether ETF in 2024. He argued SEC's prevalent hostility towards cryptocurrencies, with Gary Gensler, SEC’s Chair, hinting this sentiment when the products were commissioned. Yusko added that the SEC might categorize Ether as a security – unlike Bitcoin which is acknowledged as a commodity. But Seyffart counters this, stating that the SEC already essentially accepted Ethereum as a commodity.
Rika Khurdayan, U.S. chief legal officer for Bitstamp, a European cryptocurrency exchange, suggests that the SEC is indeed on course to authorize an Ether ETF, though the process might take longer due to Ethereum's unique features compared to Bitcoin. This includes its underlying technology, capabilities, and the complex history and circumstances surrounding its creation.
Ether has continuously secured the second highest market capitalization in the crypto sector for years and Ether futures are already traded in U.S. markets. But Ethereum's blockchain and functionalities differ significantly from Bitcoin's, making it challenging for regulators.
The premiere of Bitcoin ETFs indicated investors' keenness in crypto-based instruments, with these products witnessing billions in daily turnover. It's still uncertain whether Ether will follow the same trend.
The optimism for an Ether ETF approval in 2024 is grounded on numerous factors: the simultaneous listing and regulation of Bitcoin and Ethereum futures, record-breaking participation from big traders last year, increasing market stability and growing demands from institutional investors all push for regulatory approval.
BlackRock was pivotal in the approval of Bitcoin ETFs by the SEC. After numerous rejections before 2023, BlackRock's entrance helped swing the tide by presenting 575 approvals against only one rejection.
Nevertheless, Ether's ETF candidacy may encounter an obstacle due to Gensler's perspective on cryptocurrencies. According to him, all cryptocurrencies, apart from Bitcoin, are securities. This could pose an issue for the approval of other crypto-based ETFs.
Overall, an Ether ETF is potentially achievable but it's yet to be seen if it will receive regulatory certainty and benefit from the actual results of the Bitcoin ETFs.
Published At
2/9/2024 5:01:00 PM
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