The Securities and Exchange Commission (SEC) has officially granted approval for all Spot Ethereum ETFs, marking a significant milestone in the crypto industry. This decision comes five months after the SEC gave the green light to Spot Bitcoin ETFs, making it the second cryptocurrency-based ETF to receive approval in the country. The approval of these ETFs further enhances Ethereum’s accessibility for institutional investors.
The journey to this point has been filled with uncertainty and anticipation. Following the approval of Spot Bitcoin ETFs, the market was eagerly speculating on the next cryptocurrency to receive approval. Naturally, all eyes turned to Ethereum. However, the initial sentiment towards the SEC’s approval was somewhat pessimistic.
Several issuers, including VanEck, ARK21 Shares, Hashdex, Invesco Galaxy, Franklin Templeton, Fidelity, and BlackRock, submitted applications for Ethereum-based ETFs. VanEck faced the most immediate approval deadline. This approval means that asset managers such as Grayscale, Fidelity, and Bitwise can now launch ETFs that directly track the price of Ethereum (ETH).
Bloomberg analyst Eric Balchunas had previously estimated a 25% chance of approval by May 23, citing the SEC’s lack of engagement compared to the Bitcoin ETF approval process. However, recent wins for the crypto industry in Congress have raised hopes among crypto proponents, 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 allows for the sharing of information available to the CME by monitoring its markets, including the CME ether futures market.
Although Spot Ether does not trade on the CME and the CME does not directly monitor Spot Ether markets, the SEC has determined that there are sufficient “other means” to prevent fraud and manipulation in this context. However, the SEC also acknowledges that this is not the sole method for meeting this statutory obligation.
The SEC’s decision is based on its findings of a strong correlation between the CME Ether futures and the actual Ether market prices. This correlation demonstrates that sharing information between markets can effectively combat fraud and manipulation.
According to the SEC’s filing, the correlation between the CME ether futures market and the spot ether market has remained consistently high over the past 2.5 years. These figures, ranging from 86.4% to 98.4% using hourly data and 75.8% to 90.2% using five-minute data, support the SEC’s decision to approve the Spot Ethereum ETFs.
The SEC’s filing also highlights 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 provided further clarity on the descriptions and terms of the trusts, aligning them with the applicable exchange’s listing standards and other approved ETFs. These changes did not raise any new regulatory concerns and helped in the evaluation process.
Overall, this approval of Spot Ethereum ETFs by the SEC signifies a significant step forward for the crypto industry and Ethereum’s accessibility for institutional investors.
