Ethereum ETFs Receive SEC Approval In Abrupt About-Face

Ethereum ETFs Receive SEC Approval In Abrupt About-Face

On Thursday, in a rather stunning reversal, the US Securities and Exchange Commission (SEC) announced the approval of eight spot Ethereum ETF applications.

This effectively saw the trading of Ethereum get the green light on Wall Street. However, the ETFs would not be available for trading immediately.

The approval

A total of eight applications were approved. This included the conversion of the Grayscale Ethereum Trust.

The other Ethereum ETFs that were approved were Bitwise, VanEck, Fidelity, Franklin, ARK/21 Shares, Invesco Galaxy, and BlackRock’s iShares Ethereum Trust.

James Seyffart, the Bloomberg ETF analyst, said that it could be a few weeks before the ETFs become available for trading.

It would take some time before the S-1 documents submitted by the fund managers are approved, which is required for trading to be possible.

Just a week earlier, such an outcome had been written off as highly unlikely by most crypto industry leaders and financial experts.

To begin with, the SEC had not given any indication that it was planning on moving forward with any spot Ethereum ETF applications before the looming deadline on May 23rd.

The impact

Just a few weeks before, Consensys, an Ethereum software company, had filed a lawsuit against the securities regulator.

In the said lawsuit, the company alleged that the SEC had secretly labeled Ethereum as an unregistered and illegal security for a year.

If the SEC did consider Ethereum as a security, then a different process would have been applicable for Ethereum ETFs than the one currently being followed.

Hence, the approval of spot Ethereum ETFs confirms that the SEC does not regard ETH as a security. This outcome is undoubtedly a major win for crypto advocates.

This is due to the crucial role that ETH plays in supporting the Ethereum network. The latter has been used to build a number of important projects and services in the crypto industry.

The amendments

However, the most crucial detail is the amendments made to the Ethereum ETF applications by the issuers this week.

They amended the language of their applications related to the staking of customer ETH. In September 2022, Ethereum had made the transition to the Proof-of-Stake (PoS) system.

Since then, ETH holders have been able to earn rewards on deposits of their tokens with the network. The SEC does not have a favorable stance towards staking services.

According to the regulator, financial intermediaries engage in an illegally unregistered securities scheme when they offer staking services.

As far as spot Ethereum ETFs are concerned, issuers buy and store ETH on behalf of their clients. As for ETH futures ETFs that had been approved in October last year, they track derivatives contracts.

Now that spot Ethereum ETFs have been approved, it would allow traditional investors and financial institutions to get ETH exposure without having to hold the asset.

This historic action comes after the SEC had approved 11 spot Bitcoin ETFs back in January. They have attracted almost $13 billion in inflows since their launch.