A
representation
of
cryptocurrency
Ethereum
is
placed
on
a
PC
motherboard
in
this
illustration
taken
on
June
16,
2023.
Dado
Ruvic
|
Reuters
The
SEC
has
approved
a
rule
change
Thursday
that
would
pave
the
way
for
ETFs
that
buy
and
hold
ether,
one
of
the
world’s
largest
cryptocurrencies.
The
decision
comes
less
than
six
months
after
the
Securities
and
Exchange
Commission
approved
bitcoin
ETFs.
Those
funds
have
proven
to
be
a
big
success
for
the
industry,
with
net
inflows
already
surpassing
$12
billion,
according
to
FactSet.
Late
May
had
long
been
pegged
as
a
potential
decision
date
for
the
ether
funds
since
it
coincided
with
a
deadline
for
the
SEC
to
decide
whether
the
VanEck
Ethereum
ETF
could
proceed.
Many
of
the
companies
that
sponsor
bitcoin
ETFs
—
including
BlackRock,
Bitwise
and
Galaxy
Digital
—
have
also
started
the
process
of
the
launching
an
ether
fund.
The
price
of
ether
rose
just
2%,
although
it
follows
a
20%
surge
from
earlier
in
the
week
in
anticipation
of
Thursday’s
decision.
Some
investors
may
also
be
on
pause,
as
the
SEC’s
rule
change
approval
does
not
guarantee
that
all
the
funds
will
launch.
Specifically,
the
SEC’s
order
approves
applications
from
various
exchanges
to
list
eight
different
ether
funds.
The
order
technically
does
not
approve
the
funds
themselves
or
set
a
date
for
the
ETFs
to
begin
trading.
Ether
ETFs
are
expected
to
be
smaller,
at
least
initially,
than
their
bitcoin
counterparts.
The
Grayscale
Ethereum
Trust
currently
has
about
$11
billion
in
assets,
much
smaller
than
what
the
firm’s
bitcoin
fund
was
before
its
conversion.
The
approval
of
the
ether
ETFs
is
a
sign
that
the
SEC’s
stance
toward
crypto
may
be
softening
after
a
series
of
legal
fights.
The
agency
lost
a
lawsuit
against
Grayscale
in
2023
that
spurred
the
approval
for
the
bitcoin
products.
The
SEC’s
push
to
regulate
crypto
has
also
come
under
scrutiny
by
politicians.
The
Senate
last
week
passed
a
resolution
to
withdraw
an
SEC
staff
bulletin
about
accounting
rules
for
digital
assets.
Ether
is
the
second
largest
crypto
asset
and
has
become
something
of
a
blue
chip
coin
along
with
bitcoin,
although
its
value
proposition
is
distinctly
different.
While
bitcoin
is
seen
primarily
as
a
long-term
store
of
value,
an
investment
in
ether
is
considered
more
akin
to
an
investment
in
early
stage
technology.
The
ether
token
fuels
the
Ethereum
network,
which
powers
different
applications,
like
decentralized
finance
(DeFi)
projects,
nonfungible
tokens
(NFTs)
or
the
tokenization
of
real
world
assets
like
commodities,
securities,
art,
real
estate
and
more.
The
applications
approved
Thursday
do
not
apply
to
other
crypto
projects
on
the
Ethereum
network,
said
Richard
Kerr,
a
partner
in
the
law
firm
K&L
Gates.
“If
and
when
an
ether
product
is
approved,
it
won’t
mean
that
a
similar
product
for
other
digital
assets
on
the
Ethereum
platform
would
be
approved,”
Kerr
said.
Ethereum
also
provides
opportunities
for
staking,
which
is
a
way
for
investors
to
earn
interest
on
their
ether
holdings
by
locking
up
tokens
on
the
network
for
a
period
of
time
—
although
ether
ETFs
in
the
U.S.
may
not
participate.
The
SEC
has
alleged
in
lawsuits
against
Coinbase
and
Kraken
that
staking-as-a-service
offerings
are
unregistered
securities.
Ark,
Fidelity
and
Grayscale
updated
their
filings
this
month
to
remove
staking
from
their
proposals.
The
lack
of
staking
in
the
ETF
products
is
another
reason
why
ether
ETFs
may
see
less
demand
than
their
bitcoin
counterparts,
said
Steven
Lubka,
managing
director
at
Swan
Bitcoin
and
head
of
Swan
Private.
“These
numbers
are
not
going
to
match
the
bitcoin
ETF
inflows,
and
there
are
some
structural
differences
in
the
product
that
just
make
it
less
attractive
overall,”
Lubka
said.
