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The U.S. Securities and Exchange Commission has opened the door to the possible launch of eight exchange-traded funds (ETFs) tracking the world's second-largest digital coin, following the regulator's approval of the first bitcoin ETF earlier this year.
Regulators on Thursday approved rule changes for several groups, including BlackRock Inc., Fidelity Inc., Invesco Inc. and Ark Invest, to support an ETF that invests in ether, the native cryptocurrency of the Ethereum blockchain. A second round of approval is required before the product can launch.
Anticipation of approval has sent the price of Ethereum soaring more than 20% since Monday and more than 60% so far this year.
It’s a significant regulatory change for the SEC after months of silence on the issue.The SEC suddenly gave feedback to issuers and exchanges on pending applications on Monday, setting off a flurry of paperwork and amendments.The SEC faced deadlines by Thursday and Friday to respond to VanEck and Ark’s ethereum ETF applications, respectively, according to Bloomberg Intelligence data.
“This is an important step in providing access to Ethereum through an ETF structure, providing easier access and greater protections and safeguards for U.S. investors,” digital asset groups Invesco and Galaxy said in a statement Thursday night. “We hope this approval signals the SEC's willingness to approve the launch of these products.”
“I think most of us were prepared for a disapproval order to be issued,” said Katherine Dowling, general counsel at Bitwise Asset Management, one of 11 U.S. bitcoin ETF issuers and the firm that has applied to launch an ethereum ETF.
It's unclear if and when the SEC will grant the second round of approval required before the product can be launched.
SEC Chairman Gary Gensler explained his reluctance to launch crypto investment products in the U.S. market at the Investment Company Association conference on Thursday morning. Gensler cited the myriad fraud cases that have affected the crypto industry, including the case of FTX founder Sam Bankman Freed, who was sentenced to 25 years in prison in March in connection with the disappearance of billions of dollars from cryptocurrency exchanges.
“It's caused by widespread non-compliance with U.S. law,” Gensler told ICI CEO Eric Pan, “it's caused by fraud and shenanigans. It's caused by some of the industry's leading figures in this field, either in prison, waiting prison or awaiting extradition.”
The SEC lost a legal battle against asset manager Grayscale Investments last year over the company's attempt to turn its flagship bitcoin trust into an ETF. After that decision, the SEC, with apparent hesitation, approved the launch of Grayscale's bitcoin product and 10 other new ETFs earlier this year.
