Ether ETFs Clear Major Hurdle, Though SEC Hasn't Cleared Them for Trading Yet

The U.S. Securities and Exchange Commission (SEC) confirmed yesterday it has approved critical rule changes to allow for exchange-traded funds holding Ethereum's native token, ETH.

The U.S. Securities and Exchange Commission (SEC) on Friday gave critical approval for exchange-traded funds (ETFs) to begin listing a product that tracks the performance of Ethereum’s native token, ETH. The move comes as a surprise to many in the crypto industry, who had largely given up hope on seeing a spot ether ETF approved this year.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.

The SEC’s decision to approve these products now seems just as arbitrary as its decision to hold out on approving them for so long. In an interview with CoinDesk’s Jesse Hamilton hours before the approval became public, Gensler said he’d follow “how the courts interpret the law” and that the “DC Circuit took a different view, and we took that into consideration and pivoted.”

As many have already noted, it appears there has been a seachange regarding crypto’s regulatory situation. On Thursday, the House took a historic vote to approve the most substantive piece of crypto-specific legislation to date. This came on the heels of both the upper and lower houses of Congress voting to repeal a controversial SEC crypto custody accounting rule.

With significant participation from Democrats in both bills, it appears that the U.S. government’s long war on crypto is nearing an end. Notably, President Biden announced that he wouldn’t veto the crypto market structure bill, FIT21, which the White House officially opposes – a pretty major concession.

It’s possible that all these events on the Hill acted like a temperature check, and helped convince Gensler that his approach to crypto was becoming a political hazard. Afterall, former President Donald Trump did just announce his support for crypto in a big way – and denying ETH ETFs on the basis, purportedly, that the SEC wasn’t having “productive” meetings with applicants would be great ammunition.

To be sure, the SEC didn’t approve ETH ETFs to actually list anytime soon – just the Cboe, NYSE Arca and Nasdaq’s 19b-4 proposals, which would allow them to list the funds once firms like Ark Invest, Bitwise, BlackRock, Fidelity and Grayscale, among others, get their S-1 filings approved. That could take months.

Well first off, the launch of spot ETH funds means that there may soon be a lot more institutional interest in the second largest cryptocurrency. Not only did the move act as a sort of stamp of approval, it will also create a familiar on-ramp for buying the asset for anyone from mom and pop investors looking to diversify their 401(k)s to hedge funds, much in the same way ETFs did for bitcoin.