In a groundbreaking development for the cryptocurrency industry, the chances of the United States Securities and Exchange Commission (SEC) giving the green light to an Ethereum spot exchange-traded fund (ETF) have significantly increased. Bloomberg’s senior analyst, Eric Balchunas, recently raised the approval odds from 25% to 75%, suggesting that political pressures may be influencing the SEC’s position.
Previously, the SEC had shown little interest in ETF applicants and had maintained a cautious approach towards cryptocurrency-related financial products. However, recent reports indicate that the SEC is now requesting exchanges like the New York Stock Exchange (NYSE) and Nasdaq to update their filings. This move could indicate a shift in the SEC’s regulatory approach. Although there hasn’t been an official confirmation from the SEC, this development has sparked extensive speculation within the financial community.
Nate Geraci, co-founder of the ETF Institute and president of the ETF Store, highlighted that the final decision on the registration requirement for individual funds (S-1s) is still pending. Geraci pointed out that the SEC could approve the exchange rule changes (19b-4s) separately from the fund’s registration (S-1). This procedural detail suggests that the SEC could postpone the registration beyond the upcoming May 23 deadline for VanEck’s Ethereum spot ETF request. This would give the regulator more time to thoroughly review and approve these complex documents.
The intricacies and risks associated with proof-of-stake (PoS) cryptocurrencies introduce another layer of complexity to the SEC’s decision-making process. Alex Thorn, Head of Research at Galaxy, emphasized the potential regulatory balancing act the SEC might undertake. Thorn speculated that the SEC could differentiate between Ethereum (ETH) not being classified as a security and staked ETH, or “staking as a service ETH,” potentially being treated as a security.
He noted that this approach would align with the SEC’s various court cases and investigations, potentially allowing the SEC to approve Ethereum ETFs while maintaining its previous positions. Renowned cryptocurrency lawyer Jake Chervinsky also commented on the potential implications of the SEC approving a spot ETH ETF. Chervinsky stated that if the spot ETH ETF were approved, it would come as a genuine surprise to everyone closely involved in the process in Washington, D.C. While this doesn’t mean approval is impossible, it would likely indicate a significant shift in US crypto policy after the SAB 121 vote, potentially more significant than the ETF itself.
Overall, the decision to approve an Ethereum spot ETF could be a pivotal moment in the United States’ approach to cryptocurrency regulation. If approved, it could signify a broader acceptance and integration of digital assets into mainstream financial markets, potentially reshaping the landscape of US crypto policy and providing cryptocurrencies with a new level of legitimacy.
