New Ether ETFs Are Looking More Likely. What It Means for Bitcoin and Other Cryptos.
Just a few days ago, it looked almost certain that the Securities and Exchange Commission was poised to reject efforts by
VanEck, and others to launch exchange-traded funds holding Ether. Now, it is looking increasingly likely that such products will move forward.
What changed is that SEC staff on Monday told exchanges where the products would list that it is leaning toward approving them, according to people familiar with the matter. The agency provided comments on the applications that, if resolved in time, could result in approvals as soon as this week.
Ether, with a market value of $455 billion, is the second-largest cryptocurrency. Only Bitcoin is larger.
The SEC didn’t immediately respond to a request for comment. In the past, the agency has declined to comment on individual filings.
On Thursday, the SEC faces a final deadline to approve or reject a so-called 19b-4 filing that would pave the way for the launch of an ETF holding spot Ether by VanEck. Over the next few months, it has similar deadlines for filings by exchanges on behalf of firms including ARK Invest, 21Shares, Grayscale Investments, Fidelity, BlackRock, and
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ETFs holding Ether futures are permitted by the SEC, but none that would hold the currency itself have been approved.
One person familiar with the matter said that the SEC gave feedback on applications to most issuers, even in cases when the deadlines for the agency to respond weren’t until later in the year. That could indicate that the SEC wants to coordinate the launch of several Ether ETFs at once.
That is what happened with the first spot Bitcoin ETFs, which were launched in January. After rejecting attempts to launch such ETFs for years, the SEC allowed many of them to come to market at the same time.
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The funds have attracted billions of dollars in assets and their launch has helped propel Bitcoin to a 60% gain this year.
Reports that the SEC is close to allowing Ether ETFs sent prices higher on Tuesday. On Tuesday morning, the price was up 23% over the past 24 hours to $3,790, while Bitcoin was up 5% to $70,350.
ETF approvals could potentially open the Ether market to institutional investors, such as endowments and pension funds, that are unable or unwilling to invest in cryptocurrencies directly. It also could increase interest in even smaller cryptocurrencies, like Solana and Avalanche, as investors factor in greater odds that other tokens might also eventually get the nod to be included in funds.
If the ETFs come to market, that could also spell good news for investors in the
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The trust has existed for years but trades like a closed-end fund, with a market price that is often at a significant discount to the value of the Ether it holds. Grayscale is seeking to convert the trust into an ETF, which would close the discount and give investors an immediate return. On Monday, the trust traded at a 12% discount to the value of its Ether.
Even if the SEC approves the first 19b-4 filings this week, it isn’t necessarily the case that the Ether ETFs will be launched at the same time. The agency has yet to provide feedback to at least some issuers on the other critical part of launching the ETFs: the S-1 filings that accompany the issuance of any new securities, the people said. Those documents detail how the fund operates and disclose its risks and costs.
Unlike the 19b-4 filings, those documents don’t have a deadline by when the SEC must respond, so in theory, the agency could delay their approval for weeks or months. That could eventually bring about lawsuits from issuers seeking to launch.
The journey to an
isn’t finished, but the road is looking much shorter than it did just a few days ago.
Write to Joe Light at joe.light@barrons.com
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