SEC Approves Ethereum Spot ETFs, Trading to Begin Tomorrow

Key points to remember

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

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The U.S. Securities and Exchange Commission (SEC) has given the green light to the launch of several Ethereum spot exchange-traded funds (ETFs), which are expected to begin trading on July 23, 2024.

The SEC’s decision comes after a lengthy review process, initially hesitant due to concerns about Ethereum. Security Classification and Staking ComplexitiesHowever, the landscape has changed following a successful legal challenge filed by Grayscale Investments in August 2023, arguing in favor of Ethereum ETFs alongside Bitcoin ETFs.

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

What are Ethereum Spot ETFs?

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

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

How Ethereum ETFs were born

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

The road to this point has been marked by unexpected turns. Many industry observers initially expected the SEC to reject the Ethereum spot ETF proposals. However, in the days leading up to the May decision, discussions between issuers and the regulator increased significantly, which some believe may reflect a politically motivated shift in stance.

One of the key developments in this process was the clarification in the amended documents that these funds would not be staking their ETH holdings. This decision addressed potential regulatory concerns and paved the way for final approval.

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

The launch of Ethereum spot ETFs in the United States comes about six months after the launch of the first U.S. ETF spot Bitcoin ETFs In January, these Bitcoin funds attracted considerable interest, accumulating approximately $17 billion in net inflows since their launch. However, industry experts expect demand for Ethereum ETFs to be more modest, with some estimates projecting inflows ranging from 15% to 30% of Bitcoin ETF flows.

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

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