ETH ETFs “Inevitable” in US, European Market Way Ahead With ETH ETPs
Several applications have been submitted for Ethereum exchange-traded funds with the U.S. Securities Exchange Commission (SEC) and the decision for approving or denying the products has been pushed back which is in line with analyst expectations.
Unsurprisingly, on Monday, the SEC delayed a decision to approve the BlackRock spot Ethereum ETF. The SEC now has until May 23 to approve or reject VanEck’s ETF application for an Ethereum ETF tracking the world’s second-largest cryptocurrency.
In January, the SEC approved almost a dozen Bitcoin spot ETFs which has caused a trading frenzy as demand for the products continues to accelerate. One of the eleven Bitcoin spot ETFs approved is the BlackRock iShares Bitcoin Trust trading under the ticker symbol “IBIT.” BlackRock’s ETF is leading the pack and so far has attracted $10 billion in assets under management (AUM) in just under two months since launching.
ETH ETF Approval “Inevitable”
Many product providers are optimistic about the approval of more crypto products believing it is inevitable the SEC will eventually approve Ethereum ETFs due to the demand.
“I think it is inevitable Ether is next,” Hector McNeil, co-CEO and the co-founder of HANetf, a firm which markets and distributes exchange-traded products, told Cryptonews: “If Bitcoin can be approved and meets all the liquidity and asset class thresholds then Ether qualifies,” adds McNeil.
European Market Way Ahead of US With ETH ETPs
Across the pond in Europe, many issuers are sitting smugly after successfully listing numerous cryptocurrency exchange-traded products (ETPs) years ago giving investors exposure to Bitcoin and Ethereum. Crypto ETP providers in Europe include CoinShares, 21Shares, WisdomTree, ETC Group, Valour and Fidelity.
“We already have these [ETH ETFs] in Europe we have over $130 million AUM in ETC Group’s Physical Ethereum ETP [trading under the ticker symbol ZETH] and it’s been in the market for over four years,” explains McNeil from HANetf.
Crypto ETPs Versus ETFs – What’s the Difference?
According to CoinShares, a European asset manager specializing in digital assets, in the U.S. the term “ETF” has become the default term for all exchange-traded products that aim to replicate the performance of an underlying asset or benchmark.
“In Europe, due to specific fund regulations, the term “ETF” cannot be used for single assets like bitcoin, gold, or smaller baskets of assets. This regulatory distinction means that when European investors search for a “crypto ETF,” they should be searching for a “crypto ETP” instead,” explains CoinShares on its website.
In February, CoinShares announced investors of the Europe-listed CoinShares Physical Ethereum ETP (ticker: ETHE/CETH) can earn a 1.25% staking reward per year.
CFTC-Regulated ETH Futures Already Trading on CME
Another point worth noting is that the U.S. has regulated futures products which give investors exposure to Ethereum approved and regulated by the Commodity Futures Trading Commission (CFTC).
“The remarkable success of BTC ETFs, coupled with the existing CFTC-regulated ETH futures trading on CME, paints a compelling picture for an imminent ETH ETF,” Chanchal Samadder, head of product at ETC Group, told Cryptonews, in an email.
“The market’s leading ETF issuers have filed applications, signalling their confidence in this development. While the SEC’s stance on whether ETH qualifies as a security remains uncertain, the undeniable momentum, driven by institutional investor demand makes a strong case for approval,” said Samadder.
Staked ETH ETFs Will Face Delays
One snag Samadder highlights is that a primary attraction of ETH for institutional investors lies in its staking yield. For many investors, staking is a way of earning rewards by simply holding Ethereum.
“We anticipate that staked ETH ETFs will face delays in approval in the US, unlike Europe where these products are readily accessible to investors,” adds Samadder.
Why Does the SEC Delay Decisions?
The SEC’s decision to delay indicates a cautious approach towards cryptocurrency ETFs as the regulator assesses all of the risks and regulatory considerations associated with the products. It has taken over ten years to approve a Bitcoin spot ETF. Back in July 2013, the Winklevoss twins first filed for a Bitcoin ETF but this was rejected over and over again.
