Regulators have given the green light to the first US exchange-traded funds (ETFs) that will invest directly in Ether, the world’s second-largest cryptocurrency. This approval, revealed through filings and statements from various asset managers, marks a significant milestone for the digital asset sector.
Among the firms receiving the US Securities and Exchange Commission’s (SEC) approval are 21Shares AG, Bitwise Asset Management Inc., BlackRock Inc., Invesco Ltd., Franklin Templeton, Fidelity Investments, and VanEck. While the SEC did not immediately respond to requests for comment, this development signals a shift towards a more favorable regulatory environment for digital assets in the US.
Regulatory Shift and Market Impact
This regulatory approval sets the stage for the imminent trading of Ether ETFs, reflecting a broader acceptance of cryptocurrency investments. The approval follows a notable change in the SEC’s stance, which had previously allowed Bitcoin ETFs only after a court reversal in 2023. Ether, the native cryptocurrency of the Ethereum blockchain, is crucial for various crypto-based financial services, underscoring the importance of this approval.
Republican presidential nominee Donald Trump, currently leading in the polls, has expressed a pro-crypto stance, potentially influencing future regulatory policies.
Industry Responses and Competitive Fees
Jay Jacobs, US head of thematic and active ETFs at BlackRock, emphasized the growing interest among clients in digital assets. “Our clients are increasingly interested in gaining exposure to digital assets through exchange-traded products (ETPs) which provide convenient access, liquidity, and transparency,” Jacobs stated.
In a bid to attract investments, several issuers, including BlackRock and Fidelity, are partially or wholly waiving fees on Ether ETFs temporarily. This strategy mirrors the competitive fee environment seen with Bitcoin ETFs, which have amassed net inflows of approximately $17 billion since their launch in January.
Projected Inflows and Market Analysis
Despite the success of Bitcoin ETFs, analysts predict more modest subscriptions for Ether funds. Digital-asset market maker Wintermute Trading Ltd. anticipates annualized inflows of around $4.8 billion to $6.4 billion for Ether ETFs in their first year. However, the firm suggests that actual demand may be lower, potentially ranging between $3.2 billion and $4 billion.
Challenges and Classification Issues
One significant challenge facing Ether ETFs is the lack of staking rewards, which are returns earned by owning the token directly for blockchain maintenance. This is a benefit not present in Bitcoin ETFs. Additionally, the SEC’s stance on Ether’s classification remains ambiguous. While Bitcoin is considered a commodity, the SEC views most other tokens as unregistered securities, which should fall under its regulatory purview. SEC Chair Gary Gensler has not provided a definitive classification for Ether.
Cryptocurrency Performance and Future Prospects
Bitcoin has experienced a significant surge, rising 132% over the past year and reaching a record high of nearly $74,000 in March. Ether, meanwhile, has gained 88% over the past 12 months. As of 11:45 a.m. in Singapore, Bitcoin was trading at $67,530, while Ether was at $3,475.
In addition to Ether, ETF issuers are exploring other digital assets. VanEck and 21Shares have filed for a product investing in Solana, the fifth-largest cryptocurrency by market value, indicating ongoing efforts to capitalize on the growing demand for digital assets.
The approval of the first US Ether ETFs represents a significant step forward for cryptocurrency investments, highlighting an evolving regulatory landscape and growing market interest.
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