Ethereum
SEC Approves Spot Ether ETFs
Key points to remember
- The US SEC has approved spot ether ETFs which are likely to begin trading on Tuesday.
- Spot Ether ETFs are expected to begin trading this summer after the SEC changed course on the issue in May.
- According to one analyst, 20-25% of the inflows seen by spot bitcoin ETFs this year are expected to be seen in spot ether ETFs.
- Questions remain about the legal status of ether when staked.
Many Ether Spot exchange-traded funds (ETFs) will likely begin trading on Tuesday, July 23, 2024 after receiving final approval from the U.S. Securities and Exchange Commission (SECOND).
Ether (ETH) is the underlying cryptocurrency of the Ethereum network, which is the second largest crypto network by market capitalization.
As of Tuesday morning, the following spot ether ETFs had current prospectuses, meaning the SEC had cleared them for trading:
- 21Shares Core Ethereum ETF (CETH)
- Bitwise Ethereum ETF (ETHW)
- Fidelity Ethereum Fund (FETH)
- Franklin Ethereum Trust (EZET)
- Invesco Galaxy Ethereum ETF (QETH)
- iShares Ethereum Trust Exchange Traded Fund (ETHA)
- VanEck Ethereum ETF (ETHV)
- Grayscale Ethereum Trust (ETHE)
- Grayscale Ethereum Mini Trust (ETH)
Ether was up about 2.6% as of 5:45 a.m. ET Tuesday.
Optimism around Spot Ether ETFs
Bitcoin Spot ETFs that began trading in January have boosted demand for bitcoin (Bitcoin) and were partly responsible for bitcoin’s rise to record highs in March.
Spot ether ETFs are expected to capture about 20% to 25% of the flows seen by spot bitcoin ETFs in their first few months, said James Seyffart, an analyst at Bloomberg Intelligence. told Investopedia.
Ether ETFs could send the price of ether to an all-time high above $5,000, Bitwise chief investment officer Matt Hougan wrote in a recent commentary. Hougan predicted that the new ETFs would generate as much as $15 billion in new assets over 18 months.
Questions remain around staking
The Ethereum blockchain operates on a proof of stake consensus mechanism for its operations such as reconciling and recording transactions on the network.
Unlike the proof of work A mechanism followed by the Bitcoin network where millions of nodes compete for rewards to be the first to verify blocks, Ethereum relies on staking. Staking is a process by which ether holders pledge their cryptographic tokens to “validators” who then participate in verifying transactions. Ether owners earn a reward in exchange for staking their tokens.
The SEC has previously raised the question of whether ether is a security under its jurisdiction, although it has not expressly classified it as such. The Commodity Futures Trading Commission (CFTC) classifies bitcoin and ether as commodities.
Why this classification matters: The SEC has also considered staking to be an offering of securities in the past. The SEC recently sued blockchain technology company Consensys to offer access to staked ether through its MetaMask wallet.
This is probably why, for now, none of the Spot Ether ETFs will be able to stake the Ether they hold, even at the expense of higher returns for investors.
“I think something like staking, or any product feature — we’ve seen that on Bitcoin exchange-traded products as well, there were product features that some people would have liked to have included but weren’t, those are always open to reconsideration as far as I’m concerned,” SEC Commissioner Hester Peirce told Coinage Media in an interview.
UPDATE — This story has been updated following the SEC’s approval of the Grayscale Ethereum Trust and Grayscale Ethereum Mini Trust.
Correction, July 23, 2024 — This article has been corrected to reflect the correct date that spot ether ETFs begin trading.