Multiple Ethereum exchange-traded fund (ETF) applications have been submitted to the U.S. Securities Exchange Commission (SEC), and the decision on whether to approve or deny these products has been postponed, aligning with analysts’ predictions.
As anticipated, the SEC announced a delay in the approval decision for the BlackRock Ethereum ETF on Monday. The SEC now has until May 23 to make a determination on VanEck’s ETF application, which seeks to create an Ethereum ETF tracking the world’s second-largest cryptocurrency.
In January, the SEC approved nearly a dozen Bitcoin spot ETFs, triggering a surge in trading activity as demand for these products continues to grow. Among the eleven Bitcoin spot ETFs approved is the BlackRock iShares Bitcoin Trust, traded under the symbol “IBIT.” BlackRock’s ETF has emerged as a frontrunner, amassing $10 billion in assets under management (AUM) within just two months since its launch.
Approval of Ethereum ETFs is deemed inevitable.
The approval of Ethereum ETFs is deemed “inevitable” by many product providers, who are optimistic about the expansion of crypto products. They believe that due to the escalating demand, the SEC will ultimately approve Ethereum ETFs.
Hector McNeil, co-CEO and co-founder of HANetf, a firm specializing in marketing and distributing exchange-traded products, expressed this sentiment, stating, “I think it is inevitable Ether is next.” He further emphasizes, “If Bitcoin can be approved and meets all the liquidity and asset class thresholds, then Ether qualifies.”
The European market is significantly ahead of the US in terms of Ethereum ETPs.
In Europe, many issuers are proud of their successful listing of numerous cryptocurrency exchange-traded products (ETPs) years ago, offering investors exposure to Bitcoin and Ethereum. European crypto ETP providers 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’s been in the market for over four years,” explains McNeil from HANetf.
Crypto ETPs vs ETFs – What Sets Them Apart?
According to CoinShares, a European asset manager specializing in digital assets, in the U.S., the term “ETF” has become the default designation for all exchange-traded products aiming 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 looking for a ‘crypto ETP’ instead,” explains CoinShares on its website.
In February, CoinShares announced that investors in the Europe-listed CoinShares Physical Ethereum ETP (ticker: ETHE/CETH) can earn a 1.25% staking reward per year.
ETH futures regulated by the CFTC are already being traded on the CME.
It’s important to note that the U.S. has regulated futures products allowing investors to gain exposure to Ethereum, approved and overseen by the Commodity Futures Trading Commission (CFTC).
“The significant success of BTC ETFs, combined with the presence of CFTC-regulated ETH futures trading on CME, presents a compelling case for an impending ETH ETF,” said Chanchal Samadder, head of product at ETC Group, in an email to Cryptonews.
“Leading ETF issuers in the market have submitted applications, demonstrating their confidence in this advancement. Although the SEC’s stance on whether ETH qualifies as a security remains uncertain, the undeniable momentum propelled by institutional investor demand strongly supports approval,” Samadder added.
ETFs backed by staked ETH will experience delays.
Samadder points out a key issue: one of the main draws of ETH for institutional investors is its staking yield. Staking serves as a means for investors to earn rewards by holding Ethereum.
“We expect staked ETH ETFs to encounter approval delays in the US, unlike Europe where such products are readily available to investors,” Samadder adds.
What causes the SEC to postpone decisions?
The SEC’s choice to postpone signals a careful stance regarding cryptocurrency ETFs, as the regulator meticulously evaluates the risks and regulatory factors linked to these products. It took more than a decade to approve a Bitcoin spot ETF. The Winklevoss twins initially filed for a Bitcoin ETF back in July 2013, facing repeated rejections.