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The US Securities and Exchange Commission has cleared the way for the potential launch of eight exchange-traded funds linked to the world’s second-largest digital coin, following the regulator’s approval of the first Bitcoin ETFs earlier this year.
The regulator on Thursday approved rule changes in favor of ETFs that invest in ether, the native cryptocurrency of the Ethereum blockchain, for several groups including BlackRock, Fidelity, Invesco and Ark Invest. A second round of approvals will be required before the products can be launched.
The widespread anticipation of these approvals has sent the price of ether up more than 20% since Monday and more than 60% since the start of the year.
This is a significant regulatory change for the SEC after months of silence on the issue. On Monday, the SEC suddenly gave issuers and exchanges notice on pending applications, triggering a wave of paperwork and reviews. The SEC had faced deadlines of Thursday and Friday to respond to ether ETF requests from VanEck and Ark, respectively, according to Bloomberg Intelligence data.
“This is a key step in offering access to Ethereum through the ETF structure, which will provide US investors with easier access, protection and higher guarantees,” said Invesco and Galaxy, a group of digital assets, in a press release Thursday evening. “We hope this approval indicates a willingness by the SEC to approve the launch of these products.”
“I think most of us were resigned to a disapproval order coming,” said Katherine Dowling, general counsel for Bitwise Asset Management, one of 11 U.S. issuers of Bitcoin ETFs and which filed an application launch of an ether ETF.
It is unclear if and when the SEC will grant the second round of approvals needed before the products launch.
SEC Chairman Gary Gensler explained his reluctance to allow crypto investment products to launch in the US market on Thursday morning at an Investment Company Institute conference. He alluded to the myriad fraud cases that have affected the crypto industry, such as that of FTX founder Sam Bankman-Fried, who was sentenced in March to 25 years in prison for the missing billions of dollars of its cryptocurrency exchange.
“It comes down to widespread non-compliance with U.S. law,” Gensler told ICI CEO Eric Pan. “It comes down to frauds and scams. This is an area in which some of the leaders in the field are either currently in prison, awaiting prison, or awaiting extradition.
Last year, the SEC lost a court battle with Grayscale Investments over the asset manager’s efforts to convert its flagship Bitcoin trust into an ETF. After this decision, the regulator – with apparent reluctance – approved Grayscale’s Bitcoin product and 10 other new ETF launches earlier this year.
