The Securities and Exchange Commission (SEC) has given its approval for all Spot Ethereum ETFs, marking a historic decision following the approval of Spot Bitcoin ETFs five months ago. This is the second cryptocurrency-based ETF approval in the United States, further expanding the accessibility of Ethereum for institutional investors.
The journey leading up to this point has been filled with uncertainty and anticipation. After the approval of Spot Bitcoin ETFs, the market eagerly awaited the next cryptocurrency to receive approval. Naturally, attention turned to Ethereum. However, the initial sentiment towards the SEC’s approval was pessimistic.
Various issuers, including VanEck, ARK21 Shares, Hashdex, Invesco Galaxy, Franklin Templeton, Fidelity, and BlackRock, submitted applications for Ether-based ETFs. VanEck faced the most immediate approval deadline. This approval now allows asset managers such as Grayscale, Fidelity, and Bitwise to launch ETFs that directly track the price of Ethereum (ETH).
Bloomberg analyst Eric Balchunas previously estimated a 25% chance of approval by May 23, noting the SEC’s lack of engagement compared to the Bitcoin ETF approval process. However, recent crypto victories in Congress raised hopes among crypto advocates, despite the SEC’s historically anti-crypto stance under Gary Gensler.
To ensure market integrity, the listing exchanges have established comprehensive surveillance-sharing agreements with the Chicago Mercantile Exchange (CME) through their common membership in the Intermarket Surveillance Group. This enables the sharing of information available to the CME by monitoring its markets, including the CME ether futures market.
While Spot Ether does not trade on the CME and the CME does not monitor Spot Ether markets, the SEC has determined that sufficient “other means” of preventing fraud and manipulation have been demonstrated in this context. However, the SEC also acknowledges that this is not the sole method of meeting this statutory obligation.
The SEC’s decision and its significance are outlined in its filing. It identified a strong correlation between the CME Ether futures and the actual Ether market prices, indicating that sharing information between markets can help combat fraud and manipulation.
The filing highlights that the correlation between the CME ether futures market and the subset of the spot ether market has consistently been high over the past 2.5 years. These figures, based on hourly and five-minute data, support the SEC’s decision to approve the Spot Ethereum ETFs.
The SEC’s filing also states that it found good cause to approve the proposals before the 30th day after the publication of notice of Fidelity, Grayscale, and BlackRock’s amended filings in the Federal Register. These amendments clarified the descriptions and terms of the trusts, aligned various representations with the applicable exchange’s listing standards and other approved ETFs, and did not raise any “novel regulatory issues,” thereby aiding in the evaluation of the proposals.