Ethereum
The battle for Ethereum ETFs is getting complicated in the US – what’s next?
Michael Saylor thinks they won’t launch at all, and even some fund issuers think it’s unlikely this year. Meanwhile, other countries enjoy a first-mover advantage.
The battle to launch exchange-traded funds based on Ethereum’s spot price in the United States is heating up — and so far, the journey resembles Bitcoin’s long, complicated path to approval.
Once again, the American Securities and Exchange Commission is slow to provide a definitive response to the requests already filed. A green light is important because it would allow investors to gain exposure to ETH without owning the underlying asset.
Shades of grey And Franklin Templeton both were expected to receive a response from the SEC in April, but the regulator has now pushed back their deadlines to June.
Fidelity and BlackRock have also seen similar apps launched into the long grass. VanEck and ARK Invest are expected to receive a response later this month, but hopes for approval are quickly dwindling.
For what? Because there are signs that the regulator believes that Ether is a security and not a commodity like Bitcoin.
A growing dispute
In June 2023, speaking before the House Financial Services Committee, SEC Chairman Gary Gensler declined to say whether he believed ETH was a security.
The lack of a clear answer scared the crypto industry, especially since it contradicted previous directives from his predecessor Jay Clayton.
And even before that, around the time of The Merge in September 2022, Gensler hinted that the staking process could fall under securities rules.
Ether’s status is important because it determines which organization has regulatory oversight in the United States – and if it’s a security, it could cause big problems for other altcoins.
Consensus recently for follow-up the SEC and came to Ethereum’s defense – arguing that the commission’s “illegal power grab threatens to undermine America’s position as a leader in the next generation of the Internet.”
Saylor’s prediction
Michael Saylor, executive chairman of MicroStrategy, a staunch Bitcoin supporter who led the effort to add hundreds of thousands of BTC to the company’s balance sheet, do not believe that ETFs based on the ETH spot price will one day see the light of day. Speaking at the annual Bitcoin for Corporations event, he warned:
“This summer, it will become very clear to everyone that Ethereum is considered a crypto-asset security, not a commodity. After that, you will see that Ethereum, BNB, Solana, Ripple, Cardano – everything in the stack – is just an unregistered cryptoasset security. None of them will ever be wrapped by a spot ETF, none of them will be accepted by Wall Street, none of them will be accepted by traditional institutional investors as cryptoassets. [Bitcoin] is the only universal, consensus-accepted, institutional-quality cryptoasset in the world. There won’t be another one.
Michael Saylor
Of course, one could argue that Saylor was obligated to say this – especially since he believes BTC is the only cryptocurrency that is technically and ethically sound. Speaking at the Blockchain Economy Summit in Istanbul in July 2022, he warned that Ether’s continued upgrades “introduce new attack surfaces” that compromise security and reliability.
What happens next?
The biggest challenge now appears to be the lack of dialogue between the SEC and companies hoping to market an Ether ETF. Like Barron’s reported last month, applicants did not receive “the critical feedback needed to finalize their products.” In contrast, BTC ETF issuers had engaged in a “robust back and forth” before their funds began trading.
Jan van Eck, whose eponymous investment firm awaits SEC verdict, speaks candidly said CNBC in April said it thought the application would “probably be rejected” – while CoinShares’ Jean-Marie Mognetti predicted no approval would happen in 2024.
As the United States continues to be hamstrung by regulatory uncertainty, where the lack of clarity over the status of Ether is infuriating crypto companies, other jurisdictions are enjoying a first-mover advantage.
Even though trading volumes were rather tepid on the first day, it remains significant that Hong Kong has now launched an ETH ETF, against a backdrop of speculation this could one day open the door to investors from mainland China.
Like S&P Global recently It is worth noting that funds based on the Ether spot price have already been approved in Canada, Switzerland, Sweden and Germany, with some offering additional yield by also offering staking returns.
While ETFs in other jurisdictions now boast billions of dollars in assets under management, the United States risks falling further and further behind.