SEC Approves Ether Spot ETF Application, One Step Away from Official Listing
The U.S. Securities and Exchange Commission (SEC) has officially approved the applications for an Ether spot exchange-traded fund (ETF) from eight investment firms, including VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise.
The approval of the Ether spot ETF by the SEC marks the second major milestone for the cryptocurrency industry this year. While this news may come as a surprise to many, considering the SEC’s previous avoidance of approving Ether spot ETFs after the Bitcoin spot ETF was approved earlier this year.
James Seyffart, an analyst at Bloomberg Intelligence, commented, “A week ago, if you thought an Ether spot ETF would get SEC approval, you might have been considered crazy.”
Although most issuers of Ether spot ETFs have already received approval for their 19b-4 forms (exchange rule changes), they still need to obtain SEC signatures and complete the S-1 registration statement before the Ether spot ETFs can officially begin trading.
Industry analysts suggest that completing the S-1 registration statement may still take several weeks, and there is no guarantee that all issuers’ submitted S-1 forms will be approved. However, everything at this point is mere speculation, as the current state of the SEC is somewhat unpredictable.
SEC’s sudden change in attitude may be primarily driven by political factors
Prior to this week, the outlook for the approval of Ether spot ETF applications by issuers was pessimistic due to the SEC’s negative attitude and avoidance of communication with issuers.
However, earlier this week, the SEC started communicating with issuers and requested that they promptly submit their 19b-4 forms for Ether spot ETFs. This injected a glimmer of hope into the market, and the price of Ether reacted in advance, surging 20% on the day the news was released on May 20. As of now, the price of Ether has risen from $3,071 at the beginning of the week to $3,800, a 23.7% increase.
It is speculated that the SEC’s change in attitude may be attributed to political factors.
Prior to approval, a bipartisan group of House representatives urged the SEC to approve these ETF applications, arguing that considering the SEC’s approval of the Bitcoin spot ETF earlier this year, approving the Ether spot ETFs would demonstrate consistency in standards.
Additionally, the U.S. House of Representatives passed the 21st Century Financial Innovation and Technology Act the day before the SEC approved the Ether spot ETF. This act will clearly delineate the responsibilities of the SEC and the Commodity Futures Trading Commission, providing clearer regulatory guidelines for the cryptocurrency industry. The act still awaits approval from the Senate to become law.
Further reading:
What is the “FIT21 Act,” which will be voted on this week to make the U.S. a cryptocurrency powerhouse?
Approval of Ether spot ETF may resolve concerns about cryptocurrency being classified as “securities”
In recent years, the SEC has repeatedly claimed that cryptocurrencies are “securities” and insisted on regulating them. The agency has also taken enforcement actions against cryptocurrency companies, causing significant hardships for industry players.
However, the approval of the Ether spot ETF may signify the end of this situation, as it implies an “implicit recognition” from the SEC that Ether and similar cryptocurrencies are “not securities.”
James Seyffart, an analyst at Bloomberg Intelligence, explains that Ether spot ETFs are essentially commodity-based trusts. By giving the green light to these ETFs and approving the final S-1 forms, the SEC clearly indicates that they do not consider Ether as a security, putting an end to the long-standing debate.
Furthermore, by recognizing that “Ether is not a security,” it also clears the path for other cryptocurrencies with similar mechanisms to avoid being classified as securities, paving the way for the issuance of spot ETFs for these tokens in the future.
However, Seyffart believes that the SEC may still continue to pursue service providers that offer Ether collateral services.
“I think they will try to strike a balance with this issue. The SEC will not classify Ether itself as a security, but ‘pledging Ether’ may be considered a security. At least for the time being, I don’t think they will give up this stance.”
In the past, the SEC issued Wells Notices to U.S. cryptocurrency exchanges Kraken and Coinbase, as well as Ethereum development company Consensys, primarily for “providing cryptocurrency collateral services,” which are unregistered securities services.
Financial lawyer Scott Johnsson also pointed out that the SEC did not explicitly address the non-security status of Ether in this approval, suggesting that they “completely avoided” the issue. Therefore, participants in the cryptocurrency industry should not take this approval lightly.
Sources:
Coindesk, The Block, Cointelegraph, Cointelegraph