SEC approves Ethereum spot ETFs, trading to start tomorrow

Key Takeaways

• Ethereum spot ETFs will begin trading on July 23, 2024, following SEC approval.
• Major financial institutions like Grayscale and Fidelity are set to launch these ETFs.

The US Securities and Exchange Commission (SEC) has given the green light for the launch of multiple Ethereum spot exchange-traded funds (ETFs), with trading slated to begin on July 23, 2024.

The SEC’s decision comes after a lengthy review process, initially hesitant due to concerns over Ethereum’s security classification and staking complexities . However, the landscape changed following a successful court challenge by Grayscale Investments in August 2023, advocating for Ethereum ETFs alongside Bitcoin ETFs.

Several financial institutions, including Grayscale Investments, Fidelity Investments, Invesco, VanEck, Franklin Templeton, 21Shares, Bitwise, and iShares (BlackRock), are poised to launch their Ethereum spot ETFs on platforms like NYSE Arca and the Chicago Board Options Exchange (CBOE).

What are spot Ethereum ETFs?

Spot Ethereum ETFs differ significantly from the futures-based ETFs that have been available in the US market since October 2023. While futures ETFs provide exposure to Ether futures contracts, spot ETFs directly track the price of Ethereum, offering a more straightforward investment option for those seeking exposure to Ether.

The approval and launch of spot Ethereum ETFs is expected to have far-reaching implications for the broader crypto ecosystem. Analysts predict that these funds could attract billions in inflows over the coming months, potentially driving up the price of ETH and boosting the entire Ethereum network’s value proposition.

How Ethereum ETFs came to be

This final approval comes after weeks of collaboration between ETF issuers and the SEC to finalize disclosure documents. The regulator had previously approved the 19b-4 proposals filed by the exchanges in May, which laid the groundwork for these funds to be listed.

The journey to this point has been marked by unexpected turns. Many industry observers had initially anticipated that the SEC would reject the spot Ethereum ETF proposals. However, a few days before the May decision, there was a notable increase in discussions between issuers and the regulator, which some speculated might reflect a politically motivated change in stance.

One key development during this process was the clarification in amended filings that these funds would not stake their ETH holdings. This decision addressed potential regulatory concerns and paved the way for the final approval.

While the 19b-4 approvals in May were a landmark ruling, issuers still needed to iron out disclosure details with the SEC’s Division of Corporation Finance before the funds could be cleared for trading. By July 17, fund groups had submitted their latest round of registration statements, which included planned fees for the ETH ETFs.

The launch of spot Ethereum ETFs in the US follows about six months after the debut of the first US spot Bitcoin ETFs in January. Those Bitcoin funds have seen significant interest, accumulating approximately $17 billion in net inflows since their launch. However, industry experts expect demand for the Ethereum ETFs to be more modest, with some estimates projecting inflows ranging from 15% to 30% of the Bitcoin ETF flows.

Most issuers have set their trading fees at 0% for an initial period, with Invesco Galaxy implementing a 0.25% fee, which may influence initial investment patterns.