SEC approves Ethereum ETF, aligning ETH closer to industry winning commodity

The U.S. Securities and Exchange Commission (SEC) has approved the first Ethereum exchange-traded fund (ETF), marking a significant milestone for the cryptocurrency industry. The decision announced today will allow asset managers like Grayscale, Fidelity, and Bitwise to launch ETFs that directly track the price of Ethereum (ETH).

Ethereum rose 2% on the news and was trading at $3,900 at press time, based on CryptoSlate data.

Approval followed a rigorous application process and extensive market analysis. Grayscale’s Chief Legal Officer Craig Salm previously emphasized that the SEC had already addressed key issues in the approval process for the spot Bitcoin ETF, which also applies to the Ethereum ETF. These issues include creation and redemption processes, cash-to-spot transactions, and storage issues. Salm emphasized that the SEC’s prior engagement with the Bitcoin ETF issuer laid the groundwork for the Ethereum ETF, and pointed to the strong correlation between ETH futures and spot prices as a compelling factor for approval.

The SEC’s decision comes after some time of uncertainty and skepticism among market analysts. Bloomberg analyst Eric Balchunas estimated the likelihood of approval by May 23 at 25%, citing the lack of SEC involvement compared to the previous Bitcoin ETF approval process. However, the approval of a spot Bitcoin ETF earlier this year, the approval of an ETH ETF in Hong Kong, and recent cryptocurrency victories in Congress have raised hope among cryptocurrency advocates despite the SEC’s historically cautious stance under Gary Gensler’s leadership. It happened.

The approval process included a public comment period during which the SEC sought feedback on various aspects of the proposed ETF, including fund management, creation and redemption model, and sponsor fees. This step mirrors the approach taken in the spot Bitcoin ETF application and encouraged feedback from U.S. citizens and organizations.

The approval of the spot Ethereum ETF is expected to have a significant impact on the digital asset market. Hong Fang, CEO of cryptocurrency exchange OKX, pointed out that although the price of Ethereum has risen this year, it has lagged behind Bitcoin’s rise, which appears to be influenced by market expectations about the SEC’s decision. This approval is expected to increase investor confidence and increase market liquidity.

Several issuers submitted applications to list their ETFs on the NYSE Arca exchange, with Coinbase Custody acting as custodian. Bitwise’s analysis showed a strong correlation between the ETH spot market and the CME ETH futures market. This is an important element in meeting SEC requirements for monitoring potential market manipulation.

Despite the positive results, some industry officials expressed concerns about the SEC’s approach. Participants in recent meetings with the SEC described the talks as one-sided, with agency staff withholding substantive comments on the proposal. This contrasts with detailed discussions prior to the SEC approving a spot Bitcoin ETF.

The approval also comes amid ongoing regulatory scrutiny over the classification of Ethereum as a security or commodity. According to the report, the SEC is investigating Ethereum’s regulatory classification, adding uncertainty to its approval prospects. However, today’s decision signals a favorable stance toward Ethereum-based financial products and a potential sign that Ethereum could be considered a commodity.

This approval is a milestone for the cryptocurrency industry and reflects growing interest in cryptocurrency asset financial products among traditional investment firms. As markets react to these developments, stakeholders will closely monitor the performance and impact of the newly approved ETFs.

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