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The SEC’s adoption of ether ETFs highlights the cryptocurrency’s changing political fortunes
The new door opened to ether ETFs is part of a larger story that has dominated cryptocurrency markets over the past week: The industry’s political tides appear to be shifting in its favor. The Securities and Exchange Commission’s approval Thursday night of a rule change that would pave the way for the creation of ether ETFs took most market watchers by surprise. Expectations of an approval were low at the start of the week, but last Monday they completely and suddenly changed, sending ether up 20%. The SEC’s decision followed the House of Representatives’ May 8 vote to overturn a controversial SEC accounting policy, known as SAB 121, that forces banks to treat digital assets on their books as liabilities. The White House said the same day that President Biden would veto the bill, and in any case, the Senate rejected the proposal on May 16. Meanwhile, on May 9, former President Donald Trump said he will soon begin accepting campaign donations in cryptocurrencies. “While the ether ETF news is undoubtedly positive, the real excitement lies in the underlying reason for the SEC’s sudden change,” said Rachel Lin, CEO and co-founder of decentralized derivatives trading platform SynFutures. “Until recently, the SEC and a faction of the US administration had apparently pursued an anti-cryptocurrency policy to stifle the industry. However, there appears to be a growing political awareness within the administration that cryptocurrency is an issue that could influence the election.” Historic victory Then last week, a day before the SEC approved the rule change to allow ether ETFs, the House passed a crypto infrastructure bill called FIT 21 (Financial Innovation and Technology for the 21st Century Act), which would specify when cryptocurrencies fall under the jurisdiction of the SEC versus the Commodity Futures Trading Commission. Many are hailing FIT 21 as a historic victory for the industry. “There is a sea change happening in politics right now,” Oppenheimer senior analyst Owen Lau told CNBC. “People are starting to realize that being anti-crypto is bad politics.” The consensus on the Beltway is that FIT 21 is unlikely to come to a Senate vote, but Lau said its passage in the House lays the groundwork for the next Congress next January. “We are getting closer to regulatory clarity,” he added. “The problem with the status quo is that there are no rules.” As a result, “there is a lot of unpredictability in this space that can push capital, talent and projects out of the country.” Alex Thorn, head of research at Galaxy Digital, noted that there isn’t much time in the legislative calendar for industry-friendly bills to pass, with the summer recess looming and a presidential election in the fall. However, it did not completely erase the fact that the Senate revived existing efforts, such as the Lummis-Gillibrand Responsible Financial Innovation Act, co-sponsored by Democratic Senator Kirsten Gillibrand (NY) and Republican Senator Cynthia Lummis (WY), aimed to create a comprehensive regulatory framework for crypto assets. “I would be surprised if FIT 21 or something similar actually becomes law this year,” Thorn said. “Politics is the most interesting thing. It heralds radical change [the] The Democratic leadership’s approach to this industry can only help cryptocurrencies.”