Ethereum ETFs Near Approval as SEC Discussions Progress

The long-anticipated approval of spot Ethereum exchange-traded funds (ETFs) in the United States appears imminent, with several recent developments indicating that these investment products could launch as early as this month. On 8 July, 2024, Katherine Dowling, chief compliance officer at Bitwise, told Bloomberg that Ethereum ETFs are “close to the finish line,” underscoring significant progress in discussions between issuers and the Securities and Exchange Commission (SEC).

Bloomberg ETF analyst Eric Balchunas has suggested 18  July, 2024 as a potential launch date for Ethereum ETFs, although he cautioned that the SEC’s plans remain uncertain. This follows the successful introduction of spot Bitcoin ETFs earlier this year, which attracted approximately $15 billion in inflows over six months, highlighting substantial investor interest in cryptocurrency-based investment products.

Several major asset managers, including BlackRock, Fidelity, Grayscale, 21Shares, Franklin Templeton, and VanEck, submitted amended S-1 filings for their Ethereum ETF applications on July 8, with Bitwise filing its amendment earlier on July 3. These amendments, which primarily addressed fee waivers and seed transaction details, are essential steps in the regulatory process. For instance, VanEck plans to waive sponsor fees for the first $1.5 billion over one year, while Bitwise introduced a six-month, $500 million waiver. Seed investment details were also provided, with Franklin Templeton reporting a $100,000 seed investment through Franklin Resources Inc.

The procedural advancements signify the issuers’ preparedness and efforts to enhance the attractiveness of their products. Dowling highlighted that the SEC has been open to discussions about crypto ETFs beyond Bitcoin and Ethereum, indicating potential future expansions in the crypto ETF market. “We’ve actually dialogued with the SEC about the possibility of what’s coming down the pipe with new products,” she stated, describing the communication as “quite welcoming.”

This willingness from the SEC to engage in discussions about a broader range of cryptocurrency-based investment products suggests a more inclusive future for crypto ETFs. However, analysts caution that approval for ETFs based on cryptocurrencies other than Bitcoin and Ethereum may require more time and could depend on changes in SEC leadership.

As evidence of the expanding interest in diverse crypto ETFs, VanEck and 21Shares recently filed applications for spot Solana ETFs. While these filings reflect the industry’s ambitions, they are expected to face a longer and more uncertain approval process compared to the Ethereum ETFs currently under consideration.

The move towards Ethereum ETF approval marks another milestone in integrating cryptocurrencies into mainstream finance, potentially paving the way for a more diversified and accessible market for digital assets. The procedural requirements and advancements made by asset managers demonstrate a robust commitment to meeting regulatory standards and providing secure investment options for the public.