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The SEC has approved all Spot Ethereum ETFs. This historic decision comes five months after the SEC gave the green light to Spot Bitcoin ETFs. This is the second crypto-based ETF approval in the country, further increasing Ethereum’s accessibility for institutional investors.
Also Read: US Congressmen Urge SEC to Approve Spot Ethereum ETFs
The journey to this point has been filled with uncertainty and anticipation. After approving Spot Bitcoin ETFs, the market eagerly speculated on the next cryptocurrency. Naturally, attention turned to Ethereum. However, the overall sentiment towards the SEC’s approval was initially pessimistic.
The SEC Was Impressed by the ETF Applications
Many issuers, including VanEck, ARK21 Shares, Hashdex, Invesco Galaxy, Franklin Templeton, Fidelity, and BlackRock, submitted applications for the Ether-based ETFs. VanEck faced the most immediate approval deadline. The approval means that asset managers like Grayscale, Fidelity, and Bitwise can now launch ETFs that directly track the price of Ethereum (ETH).
After careful review, we find that the Proposals are consistent with the Exchange Act and rules and regulations thereunder applicable to a national securities exchange. The Exchanges’ rules are designed to prevent fraudulent and manipulative acts and practices and, in general, to protect investors and the public interest.
SEC
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 crypto wins in Congress raised hopes among crypto proponents despite the SEC’s historically anti-crypto actions under Gary Gensler.
Surveillance-Sharing Agreements Ensure Market Integrity
The listing exchanges have comprehensive surveillance-sharing agreements with the Chicago Mercantile Exchange (CME) through their common membership in the Intermarket Surveillance Group. This facilitates sharing information available to the CME by surveilling its markets, including the CME ether futures market.
Also Read: Crypto Market Tensions Rise as ETF Decision Nears for Ethereum
Although Spot Ether does not trade on the CME and the CME does not monitor Spot Ether markets, the SEC found that sufficient “other means” of preventing fraud and manipulation in this context have been demonstrated. However, the SEC also recognizes that this is not the only means to meet this statutory obligation.
ETF Issuers Will Prevent Fraud and Manipulation
The SEC’s filing explains its decision and its meaning. It found a strong link between the CME Ether futures and the actual Ether market prices. This link shows that sharing information between markets can help stop fraud and manipulation.
The correlation between the CME ether futures market and this subset of the spot ether market has been consistently high over the past 2.5 years. The correlations range from 86.4% to 98.4% using hourly data and between 75.8% and 90.2% using five-minute data. According to the filing, these figures support the SEC’s decision to approve the Spot Ethereum ETFs.
The SEC’s filing noted 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 amended filings clarified the descriptions and terms of the trusts. They aligned various representations to the applicable exchange’s listing standards and other approved ETFs. The changes did not raise “novel regulatory issues” and helped evaluate the proposals.
Cryptopolitan reporting by Jai Hamid