The U.S. Securities and Exchange Commission on Thursday approved applications from Nasdaq, CBOE and the New York Stock Exchange to list exchange-traded funds (ETFs) linked to the price of Ethereum, potentially paving the way for these products to begin trading later this year.
ETF issuers also need to get approval before they can launch their products, but Thursday's approval came as a major surprise win for ETF issuers and the cryptocurrency industry, which until Monday had expected the SEC to reject the application.
Following the SEC's approval of a bitcoin ETF in January, marking a milestone for the industry, nine issuers, including VanEck, ARK Investments/21Shares and BlackRock, are hoping to launch ETFs tied to the second-largest cryptocurrency by market capitalization.
“This is an exciting moment for the entire industry,” said Andrew Jacobson, executive vice president and general counsel at 21Shares, calling it a “significant step” toward the products starting trading.
Thursday was the deadline for the SEC to make a decision on VanEck's application, and market participants were bracing for a rejection because the SEC did not negotiate the application.
But SEC officials unexpectedly urged exchanges on Monday to quickly tweak their filings, sending the industry scrambling to complete a process that could take weeks in just days, the people said.
Reuters was unable to determine why the SEC changed its mind.
“The introduction of a spot Bitcoin ETF has already brought significant benefits to the digital asset and ETF space, and we believe a spot Ethereum ETF will similarly provide a safe haven for U.S. investors,” said Rob Marrocco, global head of ETP listings at Cboe Global Markets.
Nasdaq and the New York Stock Exchange declined to comment.
Asked by reporters about the Ethereum ETF at an industry event early Thursday morning, SEC Chairman Gary Gensler, a cryptocurrency skeptic, declined to comment. In an email announcing the approval, an SEC spokesperson said the agency would not be commenting further.
The exchange's application sought SEC approval of rule changes needed to list the new product, but issuers must also get their ETF registration statement, detailing investor disclosures, approved by the SEC before trading can begin.
Unlike exchange filings, there’s no set deadline by which the SEC has to decide on those statements, and industry players said it’s unclear how long that will take.Two sources familiar with the process suggested that many issuers are ready to get started but that the SEC’s corporation finance division will likely require changes and updates in the coming days or weeks.
The SEC had refused to allow a physical Bitcoin ETF for over a decade due to concerns about market manipulation, but was forced to approve it after Grayscale Investments won a court case last year.
Sui Chun, CEO of CF Benchmark, an index provider for several bitcoin and ethereum ETFs, said ethereum is more complicated than bitcoin and it could take the SEC months to review the statement, but because a bitcoin ETF offers an established template, he said, the SEC “cannot go too slowly.”
A range of investors, including hedge funds, wealth advisors and individual investors, have poured more than $30 billion into cryptocurrency ETFs.
Thursday's decision marks another boost for the crypto industry's efforts to move into the financial mainstream. This week, UK regulators approved exchange-listed crypto products and the House of Commons passed a landmark bill seeking to clarify the regulation of cryptocurrencies.
The bill still needs to pass the Senate, but the broad bipartisan support is a major boost for the industry.
