Ethereum ETFs Approved in Abrupt SEC Policy Change

Ethereum ETFs Approved in Abrupt SEC Policy Change

In a surprising reversal, the US Securities and Exchange Commission (SEC) announced on Thursday that it approved eight applications for Ethereum spot ETFs, giving the green light to Ethereum trading on Wall Street.

The following funds were approved in the filing: the converted Grayscale Ethereum Trust, the Bitwise Ethereum ETF, iShares Ethereum Trust, VanEck Ethereum Trust, ARK/21 Shares Ethereum ETF, Invesco Galaxy Ethereum ETF, Fidelity Ethereum Fund, and Franklin Ethereum ETF.

When will Ethereum spot ETFs start trading? It won’t be tomorrow. James Seyffart, Bloomberg ETF Expert suggested in a tweet that it could be “a couple of weeks” before fund managers’ S-1 documents are approved to allow trading.

Just a week ago, most financial experts and crypto industry leaders had dismissed such an outcome as increasingly unlikely. For one thing, the SEC had offered little indication that it planned to move forward with any ETH spot ETF applications ahead of the looming May 23 deadline.

What’s more, just a few weeks earlier, a lawsuit filed by software company Ethereum Consensys against the SEC alleged that the regulator has considered secret ETH has been an illegal and unregistered security for over a year. (Disclosure: Consensys is one of 22 investors in Decipher.) If the SEC were to formally label ETH as a security, then Ethereum ETFs would have to be approved through a different process than the one currently in place.

Therefore, by approving ETH spot ETFs today, the SEC has tacitly admitted that ETH is not a security in itself. This result is a major victory for cryptocurrency advocates, given ETH’s crucial role in underpinning the Ethereum network, upon which many of the industry’s most prominent projects and services are built.

Fundamentally, however—In an attempt to cross the finish line—several ETH ETF issuers removed language from their applications this week regarding ETH client staking. Since Ethereum moved to a proof-of-stake system in September 2022, ETH holders have been able to deposit their funds into the network to accumulate rewards. The SEC has long considered that when a financial intermediary offers staking services, he is participating in an illegally unregistered securities scheme.

Ethereum spot ETFs, unlike ETH futures ETFs, which track derivatives contracts and were approved by the SEC in October—involve issuers actually purchasing and storing ETH on behalf of their customers. Now that ETH spot ETFs have gained approval, financial institutions and traditional investors will soon be able to gain exposure to ETH without holding any cryptocurrency.

Today’s historic action follows that of the SEC approval of eleven one-time Bitcoin ETF applications in January. Since then, Bitcoin spot ETFs have attracted almost $13 billion in net inflows.

“I always called the place of Bitcoin ETF approvals Bitcoin IPO,” said Cody Carbone, policy director at crypto lobby group Digital Chamber of Commerce. Decipher. “This is the ETH IPO. “That’s a huge seal of approval.”

Edited by Andrew Hayward.

Editor’s note: This story was updated after publication with additional details.