The United States Securities and Exchange Commission (SEC) has just approved the first batch of Ethereum (ETH) spot ETF. These ETFs could have huge implications in the financial markets, given the popularity of the asset and recognizing how spot Bitcoin ETFs were the fastest growing ETFs in ETF history, according to to BlackRock CEO Larry Fink.
JUST IN: πΊπΈ SEC approves Ethereum spot ETFs. pic.twitter.com/t7KLtcaMNg
β Bitcoin Magazine (@BitcoinMagazine) May 23, 2024
The recently approved Ethereum spot ETFs will allow investors to gain direct exposure to Ethereum, the second largest cryptocurrency by market capitalization, without having to purchase and store the digital asset themselves.
“To be clear: This does not mean they will start trading tomorrow. This is simply a 19b-4 approval. It also requires approval on the S-1 documents, which is going to take time,” said James Seyffart, an analyst at Bloomberg ETF. commented on the news. “We expect it to take a few weeks, but it could take longer. We should know more in a week or so!”
The rapidly changing chances of approval of these ETFs shocked everyone last Monday, when Bloomberg analysts Eric Balchunas and James Seyffart raised their chances of approval from 25% to 75%. “I heard rumors this afternoon that the SEC might do a 180 on this issue (an increasingly political issue), so now everyone is scrambling (like us, everyone thought (they would be refused),β Balchunas explained.
It's been a long time debate on whether Ethereum should be considered a security or a commodity. Critics of Ethereum claim that it passes the Howey test and therefore should be classified as a security. The Howey test consists of four criteria: an investment of money, the expectation of profits, a joint enterprise, and trust in the efforts of others. Here's a video below from 2014 of current SEC Chairman Gary Gensler explaining why he thought ETH passed the Howey test at the time.
Friendly reminder that the current SEC chairman believes Ethereum passes the Howey test. pic.twitter.com/qFKeBFdKCH
β Modern Stacker (@ModernStacker) January 20, 2023
And now, due to recent regulatory developments, alongside this ETF approval, regulators now appear to be moving towards regulating ETH as a commodity.
Yesterday, a bill to develop a regulatory framework for digital assets (HR 4763 – Financial Innovation and Technology Act 21 (FIT 21)) passed the House. The bill, unlike another linked to Bitcoin and crypto Invoice passed in the House and Senate earlier this month, received positive feedback from the White House, initially stating that they did not like the legislation in its current state, but that they wanted to work with Congress to find a resolution, and that they would not veto it if it reached the desk of President Biden to sign the law.
βWe got two-thirds of the House of Representatives voting in favor of crypto clarity,β Patrick McHenry, chairman of the U.S. House Committee on Services, told CNBC today. financial. “It creates a legal framework, giving the SEC an appropriate role and the CFTC an appropriate role, rather than the set of contradictory regulatory actions that these two agencies have taken over the last ten years… It defines what is a digital asset, gives it a legal framework for the trade and purchase of these assets.
#WATCH: President @PatrickMcHenry joined @SquawkCNBC to discuss yesterday's historic, bipartisan vote on this monument #FIT21. He covers :
βΌοΈ Major provisions
π Clarification @CFTC against @SECGov jurisdiction
π Next steps on the road to implementation
πΊ Donβt miss this conversation π pic.twitter.com/F49JjPf5tH
β Financial Services GOP (@FinancialCmte) May 23, 2024
If FIT 21 passes the Senate and is signed into law by President Biden, then ETH could be classified as a commodity under these new guidelines, but the official outcome of this decision remains to be seen.
Congress is also βbuilding a pro-crypto army,β according to to U.S. Senator Cynthia Lummis, who sharing his support for the House which passed FIT 21 yesterday.