Bitcoin
SEC approves rule change to allow creation of ether ETFs
The end of May was considered a potential decision date for the Ether funds, as it coincided with the deadline for the SEC to decide whether the VanEck Ethereum ETF could proceed.
Many of the companies that sponsor bitcoin ETFs – including BlackRock, Bitwise and Galaxy Digital – have also begun the process of launching an Ether fund.
The price of ether rose just 2%, although it remains a 20% increase from the beginning of the week, in anticipation of Thursday’s decision. Some investors may also be on pause, as approval of the SEC rule change does not guarantee that all funds will be launched.
Specifically, the SEC order approves registrations from various exchanges to list eight different Ether funds. The order technically does not approve the funds themselves or set a date for ETF trading to begin.
Ether ETFs are expected to be smaller, at least initially, than their Bitcoin counterparts. The Grayscale Ethereum Trust currently has about $11 billion in assets, much smaller than the company’s bitcoin trust was before its conversion.
The approval of ether ETFs is a sign that the SEC’s stance on crypto may be softening after a series of legal fights. The agency lost a case against Grayscale in 2023, which spurred the approval of bitcoin products.
The SEC’s push to regulate crypto has also come under scrutiny from politicians. The Senate last week approved a resolution to withdraw an SEC staff bulletin on accounting rules for digital assets.
Ether is the second largest crypto asset and has become something of a blue chip currency alongside bitcoin, although its value proposition is distinctly different. While Bitcoin is primarily viewed as a long-term store of value, an investment in ether is considered more similar to an investment in early-stage technology. The Ether token powers the Ethereum network, which powers different applications such as decentralized finance (DeFi) projects, non-fungible tokens (NFTs) or the tokenization of real-world assets such as commodities, securities, art, real estate and more.
The orders approved Thursday do not apply to other crypto projects on the Ethereum network, said Richard Kerr, a partner at law firm K&L Gates.
“If and when an Ether product is approved, it does not mean that a similar product for other digital assets on the Ethereum platform would be approved,” Kerr said.
Ethereum also offers staking opportunities, which is a way for investors to earn interest on their Ether holdings by locking tokens on the network for a period of time – although US Ether ETFs may not participate. The SEC has alleged in lawsuits against Coinbase and Kraken that staking-as-a-service offerings are unregistered securities. Ark, Fidelity and Grayscale updated their filings this month to remove staking from their proposals.
The lack of participation in ETF products is another reason why ether ETFs may be in less demand than their bitcoin counterparts, said Steven Lubka, managing director at Swan Bitcoin and head of Swan Private.
“These numbers are not going to match bitcoin ETF flows, and there are some structural differences in the product that just make it less attractive overall,” Lubka said.