Wall Street’s optimism for a swift approval of Bitcoin exchange-traded funds (ETFs) has gradually diminished concerning Ether ETFs, the second-largest cryptocurrency by market capitalization.
Although the Securities and Exchange Commission (SEC) technically has until late May to decide on applications for the first ETFs holding Ether, the practical window for approval is narrowing. The final deadline on May 23, pertaining to VanEck’s application for an ETF holding spot Ether, adds urgency to the situation. Other major financial players such as Invesco, BlackRock, and Fidelity are also in the fray, seeking to introduce similar funds.
In practice, if the SEC were inclined to greenlight these ETFs, it would likely opt to approve multiple applications simultaneously to maintain impartiality. This approach mirrors the SEC’s strategy in January when it simultaneously approved 10 Bitcoin ETFs. These Bitcoin ETFs have since proven highly successful, accumulating a net inflow of $33 billion and contributing significantly to Bitcoin’s record-high prices.
However, the path for Ether ETFs appears to be more challenging. While some ETF issuers have engaged in discussions with the SEC regarding their products, the agency’s feedback has been sparse compared to the extensive dialogue witnessed during the Bitcoin ETF approval process.
Initial optimism regarding the approval of an Ether ETF earlier in the year was fueled by a federal court ruling that essentially compelled the SEC to approve Bitcoin ETFs. However, several factors could differentiate Ether funds from their Bitcoin counterparts.
One key difference is the potential inclusion of staking rights in Ether ETFs, introducing additional complexities not present with Bitcoin. Additionally, regulatory uncertainty remains regarding the classification of Ether, with SEC Chair Gary Gensler hinting at the possibility of labeling it as a security, which could complicate the approval process.
In the event of a denial, some Ether ETF applicants may resort to legal action against the SEC, as seen in previous cases involving Grayscale Investments and the Grayscale Bitcoin Trust.
While there’s a possibility that the SEC may revisit discussions with issuers in the coming weeks and ultimately approve Ether ETFs, technical and regulatory hurdles may delay their launch until 2025 or beyond.