The United States Securities and Exchange Commission (SEC) recently approved several spot Ethereum (ETH) exchange-traded funds (ETFs), a move that experts believe signals Ether’s status as a non-security.
This decision, made on May 23, 2024, involved approving 19b-4 applications from major financial institutions like VanEck, BlackRock (NYSE: BLK), Fidelity, and others, enabling them to issue spot Ether ETFs.
However, these ETFs still require S-1 approval from the SEC before they can officially launch.
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SEC’s approval and its implications
Bloomberg ETF analyst James Seyffart discussed the significance of this approval on the Bankless podcast. He noted that the SEC’s decision to approve these commodity-based trust shares implies that the regulator does not classify Ether as a security.
Seyffart suggested that this recognition might extend to other cryptocurrencies, potentially classifying them as commodities as well.
Digital asset lawyer Justin Browder echoed Seyffart’s sentiment. He asserted that if Ether ETFs receive S-1 approval, which is the final requirement for them to begin trading, it would definitively resolve the debate over Ether’s security status.
“There is no legal way for a fund whose assets consist (almost) entirely of securities to go effective on an S-1 (with one exception that doesn’t apply). If any of the ETH spot ETFs go effective on Form S-1, the debate is over: ETH is not a security.”-Browder emphasized
Industry reactions and future expectations
The approval has sparked various reactions and speculations within the industry. Finance lawyer Scott Johnsson remarked that the SEC’s approval order did not explicitly confirm Ether’s non-security status, saying the issue was “completely sidestepped.”
Nonetheless, experts expect an official statement from the SEC and its commissioners for further clarity.
Industry analysts predict a significant market impact from this approval.
Lennix Lai, OKX’s global chief commercial officer, stated that the approval could lead to institutional investors pouring $500 million into these ETFs, marking it as an important milestone potentially even more significant than the approval of Bitcoin (BTC) ETFs.
Lai believes this could ignite a new wave of institutional demand for Ethereum, given its tradeability within a traditional financial framework.
Next steps for approved ETFs
Despite the approval, all eight ETF issuers must await the SEC’s approval of their S-1 registration statements before launching their ETFs.
Bloomberg ETF analyst Eric Balchunas predicts that S-1 approvals could be granted within a few weeks, though the process typically spans up to five months. The timeline remains uncertain, but a mid-June launch is considered possible by some analysts.
As these developments unfold, the approval of spot Ether ETFs could significantly influence the cryptocurrency market, potentially triggering a substantial rally in the price of ETH.
The SEC’s approval of spot Ether ETFs represents a pivotal moment for Ethereum and the broader cryptocurrency market.
While it implicitly recognizes Ether as a non-security, further clarification from the SEC is anticipated.
The market response and institutional investments following this approval will be closely watched as they may set a precedent for other cryptocurrencies and their regulatory classifications.
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