ETH ETFs: The Inevitable Future of Crypto Investments in the US
Several applications have been submitted for Ethereum exchange-traded funds (ETFs) with the U.S. Securities Exchange Commission (SEC), and the decision on approving or denying these products has been delayed, as expected by analysts.
The SEC recently announced that it has pushed back its decision to approve the BlackRock spot Ethereum ETF, giving itself until May 23 to make a final ruling. Meanwhile, VanEck’s application for an Ethereum ETF, which tracks the world’s second-largest cryptocurrency, is still awaiting approval.
The SEC’s approval of nearly a dozen Bitcoin spot ETFs earlier this year caused a trading frenzy, as demand for these products continues to rise. Among the approved Bitcoin spot ETFs is BlackRock’s iShares Bitcoin Trust, which has already attracted $10 billion in assets under management (AUM) since its launch two months ago.
ETH ETF Approval “Inevitable”
Many industry insiders believe that the approval of more crypto products, particularly Ethereum ETFs, is inevitable due to the growing demand in the market. Hector McNeil, co-CEO and co-founder of HANetf, a firm that markets and distributes exchange-traded products, stated that if Bitcoin can meet all the liquidity and asset class thresholds set by the SEC, then Ethereum should also qualify for approval.
European Market Ahead of US with ETH ETPs
In Europe, issuers have already successfully listed numerous cryptocurrency exchange-traded products (ETPs) that provide investors with exposure to Bitcoin and Ethereum. Some of these ETP providers include CoinShares, 21Shares, WisdomTree, ETC Group, Valour, and Fidelity. For instance, ETC Group’s Physical Ethereum ETP has been in the market for over four years and has accumulated over $130 million in assets under management (AUM).
Crypto ETPs vs. ETFs – Understanding the Difference
The terminology used to classify exchange-traded products that replicate the performance of an underlying asset or benchmark differs between the U.S. and Europe. In the U.S., these products are commonly referred to as ETFs, while in Europe, they are known as ETPs. This distinction is due to specific fund regulations in Europe, which do not allow the term “ETF” to be used for single assets like Bitcoin or smaller baskets of assets.
Therefore, when European investors search for a “crypto ETF,” they should actually be searching for a “crypto ETP” instead.
CFTC-Regulated ETH Futures Already Available
It’s worth noting that the U.S. already has regulated futures products that give investors exposure to Ethereum. These futures are approved and regulated by the Commodity Futures Trading Commission (CFTC). The existence of these products, combined with the success of Bitcoin ETFs in the market, makes a strong case for an imminent Ethereum ETF approval.
Staked ETH ETFs Face Potential Delays
One potential hurdle for staked Ethereum ETFs is the attraction of staking yield for institutional investors. Staking allows investors to earn rewards simply by holding Ethereum. However, Chanchal Samadder, head of product at ETC Group, anticipates that staked ETH ETFs may face delays in approval in the U.S., unlike in Europe where these products are readily accessible.
Why Does the SEC Delay Decisions?
The SEC’s cautious approach towards cryptocurrency ETFs is evident in its decision to delay approvals. The regulator carefully assesses all the risks and regulatory considerations associated with these products. It is important to note that it took over ten years for the SEC to approve a Bitcoin spot ETF, with the Winklevoss twins’ initial application being rejected multiple times since 2013.
Hot Take: The Future of ETH ETFs in the US
The approval of Ethereum exchange-traded funds in the U.S. seems inevitable, given the growing demand and success of Bitcoin ETFs. While the SEC has delayed its decision on BlackRock’s spot Ethereum ETF and VanEck’s Ethereum ETF, industry experts remain optimistic about the future.
Europe is already ahead in offering cryptocurrency exchange-traded products, including Ethereum ETPs, which have been available for several years. However, regulatory differences between Europe and the U.S. create unique challenges for staked ETH ETFs.
Despite these challenges, it is clear that institutional investors are increasingly interested in gaining exposure to Ethereum through regulated investment vehicles. As momentum continues to build, it is only a matter of time before we see approved Ethereum ETFs in the U.S., providing investors with more opportunities to participate in this rapidly evolving market.
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