Last month, the United States (US) Securities and Exchange Commission (SEC) approved form 19b-4 filings from major financial services firms such as BlackRock, VanEck, Grayscale, Fidelity, and ARK Invest.
This move brings their proposals to launch Ethereum (ETH) Exchange-Traded Funds (ETFs) closer to realisation.
The next step for these firms is to secure approval for their S-1 registration forms from the SEC.
Once approved, these ETH ETFs could be listed, providing the broader market with accessible investment vehicles that hold actual ether, similar to the previously established Bitcoin (BTC) spot ETFs.
Spot Ether ETFs Could be Approved by Summer's End
During a recent US Senate hearing, SEC Chair Gary Gensler, in response to questions from Senator Bill Hagerty, indicated that ETH-based ETFs could receive regulatory approval by the end of the summer.
This would be the final step before these funds could be launched in the US.
He iterated:
“The Ethereum exchange-traded product filings that were in front of us from stock exchanges, I think there were eight or nine of them, were all jointly approved. Individual issuers are still working through the registration process that's working smoothly. I would envision that [it gets done] sometime over the course of this Summer.”
Gensler's projected timeline aligns with the end of the summer season on 22 September, potentially allowing for the S-1 approval of Ethereum ETFs in time for the November US elections, where cryptocurrency has become a significant topic in the presidential race.
The chairman's estimate echoes that of ETF experts at Bloomberg, who predicted it would take "weeks" to "months" for the S-1 documents to be approved following the 19b-4 approvals.
The introduction of such funds in the US was considered a matter of "if" rather than "when."
The SEC had previously blocked attempts to launch Bitcoin ETFs until a federal court ruled that the agency was mishandling the issue.
Gensler noted that the SEC has since followed that decision and allowed them.
Gensler also mentioned the launch of Ethereum futures ETFs last summer and the existence of CME Ether futures for several years.
The hearing also addressed the regulatory challenges posed by the rapidly evolving cryptocurrency industry.
Senator Richard Durbin questioned the Commodity Futures Trading Commission's (CFTC) capacity to effectively regulate crypto assets, to which Gensler emphasized the need for "proper resources" and a "well-defined disclosure" regime at the CFTC.
Senator Hagerty underscored the importance of regulatory clarity, encouraging the SEC to create an environment that discourages the offshore migration of the crypto industry.
Gensler responded by distinguishing between illegal activities, personal preferences, and the need for regulatory clarity, suggesting a separation between disliking the law and the lack of clarity.
Gensler Plays the Deflecting Game Again: Is Ethereum a Commodity or Securities? We May Never Know
In an intriguing turn, Gensler mentioned the SEC's endorsement of futures-based Ethereum ETFs in the previous year but evaded the question of Ethereum's classification as either a security or a commodity.
He stated that the agency had only "partially" approved Ethereum ETFs, without providing a definitive answer.
It is noteworthy that the CFTC has reaffirmed its stance, categorising Ethereum and several other cryptocurrencies as commodities, intensifying the regulatory tug-of-war within the digital asset sector.
At the hearing, when queried about Ethereum's status as a commodity, CFTC Chairman Rostin Behnam responded affirmatively.
This question is crucial in determining the appropriate US regulatory body for various tokens, with the SEC overseeing security tokens and the CFTC having jurisdiction over the rest.
This stance contrasts with the SEC's current position, led by Chair Gensler, which only recognises Bitcoin as a commodity, leaving other cryptocurrencies, including Ethereum, unclassified.
Gensler reiterated that while not all cryptocurrencies are securities, those that are must disclose information to the public, reasserting his argument that many tokens remain unregistered and in violation of securities laws.
Gensler has also consistently maintained that the majority of digital assets should be treated as securities, yet he has been reluctant to specify which assets fall into which category, except for those that have been the subject of enforcement actions by his agency.
Ethereum is increasingly viewed as a commodity by industry participants and legal experts, who contend that the SEC's approval of Ethereum as a single-asset ETF product suggests its classification as a commodity.
The prolonged struggle over cryptocurrency classification is exemplified by the CFTC's lawsuit against Binance last year, in which Ethereum and Litecoin were also classified as commodities.
This ambiguity underscores the ongoing debate surrounding cryptocurrency classification and the jurisdictional conflict between the SEC and the CFTC.
Spot Ether ETFs Full Approval Not "Good" Enough News to Stir Slumping Crypto Market
The cryptocurrency markets faced continued pressure during US trading hours on Thursday, extending a pullback that commenced the previous day when the Federal Reserve indicated it anticipated only one rate cut for the year.
ETH prices experienced a mid-morning rebound after Gensler stated his expectation for spot ether ETFs to receive full approvals from the SEC by the end of the summer.
This news briefly lifted ether by 1%, but it quickly became a selling opportunity, with the price reversing by more than 3% just an hour later.
At that point, ether was trading at $3,440, marking a 5% decline over the past 24 hours.
Bitcoin (BTC) also saw a nearly 5% drop, trading near a one-week low of $66,300.
The markets began to decline on Wednesday afternoon following the Federal Reserve's policy meeting, which maintained the benchmark fed funds rate range at 5.25%-5.50% but surprised with updated projections indicating just one 25 basis point rate cut expected in 2024.
Rate futures markets had been anticipating two to three 25 basis point moves this year.
US economic data on Thursday morning suggested a continued softening in both inflation and the economy, which failed to improve the overall sentiment in the crypto market.
On X, analyst Skew, among others, is attempting to interpret a market that refuses to sustain higher levels despite recent bullish news, including improving inflation data, a Bitcoin-friendly presidential frontrunner in Donald Trump, the potential approval of spot ETH ETFs, and other risk asset markets, such as U.S. stocks, reaching new all-time highs.
At the time of writing, ETH was trading at $3,516, with Bitcoin also falling to $67,038, down about 1% in the same time frame.
JinseFinance
Cheng Yuan
Coinlive 