TL;DR
- Lawmakers across the aisle are pushing the SEC to approve spot Ethereum ETFs, citing the positive reception of Bitcoin ETFs earlier this year. They argue that approving Ethereum ETFs would be a logical next step and would provide consistency in applying SEC standards.
- Industry experts are optimistic about the approval’s potential impact, predicting a domino effect that could unlock billions of dollars in investment from institutional players and further propel Ethereum prices.
- This optimism is fueled by the recent 27% surge in Ethereum prices. However, there are still hurdles to clear before trading can begin. The SEC needs to approve two separate forms, and navigating these regulatory hurdles could take months.
Lawmakers are urging the SEC to approve spot Ethereum ETFs, citing the successful launch of Bitcoin ETFs earlier in 2024. A bipartisan group led by Rep. French Hill sent a letter to the SEC arguing that approving Ethereum ETFs would be a “natural progression” following the Bitcoin ETF greenlight.
They point out the consistency in applying SEC standards and believe approval would affirm the legal reasoning used for Bitcoin ETFs. The SEC faces a critical decision today, May 23rd, as they weigh the first application for a spot Ethereum ETF.
Industry experts anticipate a domino effect if the VanEck application is approved, potentially leading to the approval of all pending applications simultaneously, similar to the Bitcoin ETF rollout. This green light would unlock billions of dollars in potential investments from institutional players, a factor that has already fueled a 27% surge in Ethereum prices over the past week.
Hurdles and the Road to Launch
However, approval by the SEC isn’t the final step before trading can begin. The SEC needs to approve two separate forms, Form 19b-4 and Form S-1. Form 19b-4 focuses on the specific structure and operational details of the ETF, essentially determining its eligibility for exchange listing.
Analysts warn that even with SEC approval, navigating these regulatory hurdles could take weeks or even months before an Ethereum ETF launches. Another wrinkle in the approval process involves staking, a process where investors lock up their Ethereum to secure the network and earn rewards.
To potentially avoid SEC concerns about classifying Ethereum as a security, ETF applicants recently revised their applications to remove staking services. Analysts believe this move could be a double-edged sword.
While it might appease the SEC, it could also unintentionally benefit Ethereum by shifting institutional demand towards holding regular ETH instead of staked ETH, potentially reducing risks associated with a concentrated supply of staked tokens.
Shifting Regulatory Landscape and Increased Approval Odds
Several factors are contributing to the increased odds of Ethereum ETF approval. Notably, former President Trump’s endorsement of cryptocurrency during his campaign has garnered attention.
Additionally, bipartisan support for crypto-related bills like H.J. Res. 109 and the Financial Innovation and Technology for the 21st Century Act (FIT21) signals a potential shift in regulatory attitudes towards cryptocurrencies.
Legal experts like Jake Chervinsky, Chief Legal Officer at Variant Fund, believe political considerations could influence the SEC’s decision. He suggests that with both political parties recognizing the potential benefits of crypto, the Biden administration may be more receptive to approving Ethereum ETFs.
Sharing this sentiment, Daniel Enright, Ecosystem Lead at LightLink, highlights the potential impact of political pressure on the approval process. He believes that if cryptocurrency becomes a prominent election issue, it could exert significant pressure on the SEC to grant approval.
Looking ahead, analysts like Michael Van de Poppe, CEO of MN Trading, suggest that the coming months could be a period of preparation for a potential Ethereum ETF launch. He estimates a 70-80% chance of approval within the next 2-3 months, with a possibility of rejection in the short term.
While some hurdles remain, the combined pressure from lawmakers, a bullish market, and a more crypto-friendly regulatory landscape suggest that the chances of Ethereum ETF approval are on the rise. The coming months will be crucial in determining the fate of these applications and their potential impact on the cryptocurrency market.
