SEC Approves Ethereum Spot ETFs

The United States Securities and Exchange Commission (SEC) has just approved the first batch of Ethereum (ETH) spot ETFs. These ETFs could have huge implications on financial markets, given the popularity of the asset and recognizing how Bitcoin spot ETFs were the fastest growing ETFs in the history of ETFs. according to BlackRock CEO Larry Fink.

ONLY IN: 🇺🇸 SEC approves Ethereum spot ETFs. pic.twitter.com/t7KLtcaMNg

– Bitcoin Magazine (@BitcoinMagazine) May 23, 2024

The newly approved Ethereum spot ETFs will allow investors to gain direct exposure to Ethereum, the second-largest cryptocurrency by market cap, without having to purchase and store the digital asset themselves.

“TO BE CLEAR: This does not mean they will start trading tomorrow. This is just the 19b-4 approval. It also needs an approval of the S-1 documents, which will take time,” James Seyffart, ETF analyst at Bloomberg. commented in the news. “We're hoping it will take a couple of weeks, but it could take longer. We should know more in about a week!”

The rapid change in the approval odds of these ETFs surprised everyone last Monday, when Bloomberg analysts Eric Balchunas and James Seyffart increase Their chances of approval range from 25% to 75%. “I heard rumors this afternoon that the SEC might be doing a 180 on this (increasingly political issue), so now everyone is fighting (like us, everyone else assumed they would be denied),” Balchunas explained .

it's been a long debate on whether Ethereum should be considered a security or a commodity. Critics of Ethereum claim that it passes the Howey test and should therefore be classified as a security. The Howey test consists of four criteria: investment of money, expectation of profit, common enterprise, and trust in the efforts of others. Below is a 2014 video of current SEC Chairman Gary Gensler explaining why he believed at the time that ETH passes the Howey test.

Friendly reminder that the current SEC Chairman believes Ethereum passes the Howey test. pic.twitter.com/qFKeBFdKCH

– Modern Stacker (@ModernStacker) January 20, 2023

And now, due to recent regulatory developments, along with the approval of this ETF, regulators seem to be pushing to regulate ETH as a commodity.

Yesterday, the House passed a bill to develop a regulatory framework for digital assets (HR 4763 – Financial Innovation and Technology Act 21 (FIT 21)). The bill, unlike another related to Bitcoin and cryptocurrencies bill voted on in the House and Senate earlier this month, received positive comments of the White House, initially said they did not like the legislation in its current state but wanted to work with Congress to find a resolution and would not veto it if it reached President Biden's desk to be signed into law.

“We had two-thirds of the House of Representatives vote for clarity for cryptocurrencies,” Patrick McHenry, chairman of the US House Republican Financial Services Committee, told CNBC today. “It creates a legal framework, giving the SEC an appropriate role and the CFTC an appropriate role, rather than the set of contradictory regulatory actions that those two agencies have taken over the last ten years… It resolves what a digital asset is, it tells you “gives a legal framework for the trade and purchase of those assets.”

#LOOK: President @PatrickMcHenry Unions @SquawkCNBC to discuss yesterday's historic bipartisan vote on the historic #FIT21. He covers:

‼️ Main provisions
🔎 Clarifying @CFTC vs @SECGov jurisdiction
🚂 Next steps on the path to enactment

📺 Don't miss this conversation 👇 pic.twitter.com/F49JjPf5tH

— Republican Financial Services Party (@FinancialCmte) May 23, 2024

If FIT 21 passes the Senate and President Biden signs it into law, then ETH could be classified as a commodity under these new guidelines, but the official outcome of that decision remains to be seen.

Congress is also currently “building a pro-crypto army.” according to US Senator Cynthia Lummis, who shared their support for the Chamber that approved FIT 21 yesterday.