Author: PANews Editorial Department
At 5:00 am Beijing time on May 24, just when everyone thought that the U.S. Securities and Exchange Commission (SEC) would issue a notice of extension or rejection, news came from the market that the SEC had officially approved the application for the Ethereum ETF!
Specifically, the 19 b-4 form of the Ethereum spot ETF was approved, including BlackRock, Fidelity and Grayscale, but the ETF issuer still needs its S-1 registration statement to take effect before it can officially start trading. The SEC has just begun discussing the S-1 form with issuers, which may take time for multiple revisions. It is not clear how long this process will take, but Bloomberg analysts speculate that it may take a few weeks. In other cases, ETFs usually take 5 months to be approved, and Bitcoin ETFs also took at least 90 days, but they expect the Ethereum spot ETF to speed up.
Currently, the issuer VanEck has submitted the revised S-1 application form for the Ethereum spot ETF. Other potential issuers include BlackRock, Fidelity, Grayscale, Franklin Templeton, Ark/21Shares and Invesco/Galaxy.
This approval marks the most important step towards the listing of an Ethereum spot ETF, a milestone for ETH, the second largest cryptocurrency, and an important node for the crypto market to move towards traditional finance.
"A week ago, I would have said that if you thought these ETFs would get SEC approval, you were a little crazy," said an analyst at Bloomberg. Now, the crazy thing has become a reality.
SEC's attitude takes a 180-degree turn
The approval follows a surprising about-face from the market regulator. After approving a spot Bitcoin ETF earlier this year, the SEC did not appear to have much contact with Ethereum ETF issuers. At one point, the prediction market had expected Ethereum ETF applications to be approved to around 10%.
Even two weeks ago, Bloomberg ETF analyst Eric Balchunas wrote that due to the lack of meaningful interaction with potential issuers and the uncertainty of Ethereum's regulatory status, the SEC may reject the application for Ethereum spot ETF on May 23. Balchunas further predicted that Ethereum spot ETF may not be realized until the end of 2025.
But the situation has changed in recent days, with favorable news coming frequently from the market.
That changed earlier this week when the SEC suddenly began talking to issuers, asking for Form 19b-4s to be returned and re-sent. When that happened, parts of the SEC seemed surprised by the 180-degree turn. “This is an unprecedented situation, which means it’s completely political,” one source said.
On Wednesday, Grayscale, Fidelity, ARK Invest and 21Shares all deleted pledge-related content, perhaps due to compliance requirements. In response, Alex Thorn, head of research at Galaxy Digital, said that if the speculation that the US SEC has made a 180-degree turn on the Ethereum ETF is true, they may try to find a balance between the following two points: ETH itself is not a security, while the pledged ETH is a security, which is consistent with their various lawsuits and reports on the investigation. In addition, on May 22, Franklin Templeton and VanEck's Ethereum spot ETF was listed on the DTCC (Depository Trust and Clearing Corporation) website, which was also seen as a positive signal by the outside world.
Political factors in the US election year may be the tailwind for the approval of Ethereum spot ETFs, which is also a shift in the US's regulatory direction for cryptocurrencies. In recent days, the US government has sent unprecedented friendly signals to the crypto market. On May 23, the US House of Representatives passed the 21st Century Financial Innovation and Technology Act (FIT21) by 279 votes to 136. The legislation will transfer regulatory authority over digital currencies from the Securities and Exchange Commission (SEC) to the more industry-friendly Commodity Futures Trading Commission (CFTC). And it will more clearly define the standards that make crypto tokens securities or commodities. On May 16, the US Senate overturned the SAB 121 rule by a vote of 60 to 38. (Related reading: Interpreting the US Democratic Party's crypto policy shift: Voting to overturn SAB 121, releasing a positive signal for Ethereum ETFs)
From this perspective, this change in attitude may have greater significance than the approval of the ETF itself.
However, it should be noted that Ethereum ETFs may find it difficult to gain the same appeal as Bitcoin ETFs. Eric Balchunas, an ETF analyst at Bloomberg, estimates that Ethereum ETFs could gain 10% to 15% of the assets gained by Bitcoin ETFs. "That would put them at $5 billion to $8 billion, which is pretty good for any normal issuance in the first few years."
Review of Ethereum’s entry into the traditional financial market
Since CME first launched Bitcoin futures in 2017, the crypto market has begun to integrate with the traditional financial market. The following is the process of Ethereum entering the traditional financial market.
February 2021: CME launches Ethereum futures
About three years after launching bitcoin futures, the Chicago Mercantile Exchange (CME) said ETH futures will allow a range of customers to hedge ether positions in the spot market.
May 2023: Issuers submit, withdraw Ethereum futures ETF applications
Issuers such as Grayscale and Bitwise have filed documents for Ethereum futures ETFs, only to abandon those plans about a week later. The move is reminiscent of when VanEck and ProShares revealed plans to launch an Ethereum futures ETF in August 2021, only to withdraw the plans just two days later.
July/August 2023: Ether futures filings resurface
Volatility Shares filed an application with the U.S. Securities and Exchange Commission in late July to restart its plans for an Ethereum futures ETF. Other fund groups followed suit in the following days. The ETF company seemed to have lost its first-mover advantage and eventually gave up its bid.
August 2023: Grayscale wins lawsuit against SEC
The judge ruled that the SEC did not properly explain its different treatment of similar products when it rejected Grayscale's bid for a spot Bitcoin ETF. This lawsuit paved the way for the subsequent ETF to pass, as the SEC had no reason to refuse approval, and the market also expected that Grayscale would also fight the SEC on the Ethereum ETF.
September 2023: Issuers begin applying for spot Ethereum ETFs
VanEck first disclosed plans for a U.S. spot Ethereum ETF in 2021 and applied again in early September 2023. Ark Invest and 21Shares did the same. This kicked off a 240-day SEC review period that expires on May 23.
The companies that eventually applied for similar products included BlackRock, Fidelity, Grayscale, Franklin Templeton, Invesco, Bitwise and Hashdex.
October 2023: Six Ethereum futures ETFs begin trading in the U.S.
VanEck, Bitwise and ProShares launched Ethereum futures funds in October. Valkyrie Investments also began adding Ethereum futures contracts to its Bitcoin futures ETF at the time. Many industry observers believe that the initial inflows of these products have not been ideal.
March 2024: Bitwise files for a spot Ethereum ETF and includes research in filing
The crypto asset management company, which applied for such a fund a little later than other companies, also published a correlation analysis to replicate the SEC’s evaluation method for Bitcoin. “We believe that the results show a strong correlation between the ETH spot market and the CME ETH futures market, and its level is substantially similar to the analysis results of the SEC in the spot Bitcoin ETF approval order,” Bitwise wrote in the X post at the time.
April 2024: Consensys sues SEC, alleging it seeks to regulate ETH as a security
The company behind MetaMask claims in its lawsuit against the U.S. Securities and Exchange Commission that the agency is attempting to regulate ETH as a security “despite the fact that ETH does not possess any security attributes.”
Today, with the SEC approving the Ethereum ETF, it is only a matter of time before it is officially listed and traded.