The US Securities and Exchange Commission (SEC) has taken a major step to launch eight exchange-traded funds (ETFs) tied to ether, the world’s second largest cryptocurrency. The move follows the earlier approval of Bitcoin ETFs and includes major financial players such as BlackRock, Fidelity, Invesco and Ark Invest.
The SEC has approved rule changes that encourage ETF investments in ether, the native cryptocurrency of the Ethereum blockchain. However, a second round of approval is required before these products can be officially launched on the market. Anticipation of these approvals has significantly boosted the price of Ether, which is up more than 20% since Monday and more than 60% year-to-date.
The development marks a significant regulatory shift for the SEC, which has been silent on the issue for several months. On Monday, the SEC provided feedback to issuers and exchanges on pending applications, prompting a flurry of revisions and paperwork. According to Bloomberg Intelligence, the SEC faced deadlines to respond to requests for ether ETFs from VanEck and Ark.
In a statement on Thursday, Invesco and Galaxy, a digital asset group, emphasized the importance of this approval: “This is a key step in offering access to Ethereum through an ETF structure that will offer US investors easier access, greater protection and guarantees. We hope this approval indicates the SEC’s willingness to approve the marketing of these products.”
Katherine Dowling, general counsel of Bitwise Asset Management, expressed surprise at the positive development: “I think most of us have resigned ourselves to the unapproved order coming to the ground.”
The timeline for a second round of SEC approval, which is necessary before the ETF can launch, remains unclear.
SEC Chairman Gary Gensler explained his cautious stance on crypto investment products during Thursday’s Investment Company Institute conference. He cited numerous cases of fraud in the crypto industry, including the high-profile case of FTX founder Sam Bankman-Fried, who was sentenced to 25 years in prison for financial misconduct.
“It has to do with rampant non-compliance with US law,” Gensler said. “It has to do with scams and fraud. This is a field where some of the leading figures are either now in prison, awaiting prison or awaiting extradition.”
Last year, the SEC lost a court battle with Grayscale Investments to turn its flagship bitcoin trust into an ETF. Following that decision, the SEC, albeit reluctantly, approved Grayscale’s bitcoin product and ten other new ETFs to market earlier this year.
This latest move by the SEC to consider ethereum ETFs represents a significant regulatory shift and could pave the way for broader adoption and integration of digital assets in traditional financial markets.
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