The US Securities and Exchange Commission (SEC) has asked the partner exchanges of applicants for spot-based Ether Exchange Traded Funds (ETFs) to update their documentation. This is a first step toward an ETH ETF approval and a surprising change of position by the SEC.
Since November 2023, BlackRock, Fidelity and other funds have been racing to launch the first spot-based ETF on Ether (ETH), the second largest cryptocurrency by market capitalization. Ideally, the applicants hope to replicate the overwhelming success of bitcoin ETFs. Over the past few weeks, the chances of approval by the upcoming May 23 deadline had steadily diminished due to a lack of communication between the SEC and the applicants, as well as a campaign by the SEC to classify Ether as a security. In a complete change of course, the SEC may now approve the spot Ether ETFs after all.
Update 24.05.2024: The SEC officially gives the green light for eight spot-based Ether ETFs.
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Chances of ETF Approval Jump from 10% to 75%
The first rumors of progress in the Ether ETF approval process first circulated on Twitter. Due to increased political pressure, the SEC supposedly suddenly changed course. Insiders confirmed the rumors to crypto media journal CoinDesk. Crypto exchanges have been asked by the SEC to update their 19b-4 filings on an expedited basis. However, this does not guarantee approval of the Ether ETFs. Product providers must first have their S-1 filings approved, for which there is no set deadline. But, the ball is rolling.
Ether ETH/USD (daily) / Chart: Tradingview
On the prediction market Polymarket, traders had previously placed a 10% chance of approval, which immediately jumped to 70% after the rumors started circulating. Bloomberg ETF analysts Eric Balchunas and James Seyffart put the odds slightly higher at 75%. The Ether price immediately responded with a jump of +19.12%. The approval should become official in the coming days.
Political pressure too high
The surprising turnaround may be due to new political pressure from the White House. A week ago, the U.S. Senate passed a resolution overturning the SEC's new accounting rules related to crypto custody at financial institutions. For the first time, the agency faced bipartisan opposition. Previously, the Democratic Party had been more critical of the sector, while Republicans have long criticized the SEC's apparent hostility to cryptocurrencies under Chairman Gary Gensler.
Presidential candidate Donald Trump is using this situation in his campaign, publicly declaring himself "pro-crypto" and warning against SEC missteps. The Biden administration may backtrack before the election to avoid alienating crypto enthusiasts. It is estimated that 20% of all Americans hold digital assets. An unwarranted delay of the Ether ETFs would put the current president in an uncomfortable position.
