In a groundbreaking decision, the U.S. Securities and Exchange Commission (SEC) has given the green light to the first spot Ethereum exchange-traded funds (ETFs). This approval represents a significant milestone for cryptocurrency advocates and investors, coming on the heels of the launch of the first U.S. spot Bitcoin ETFs earlier this year.
The newly approved Ether ETFs, which include the conversion of a $9.3 billion Grayscale Investments trust and new offerings from prominent Bitcoin ETF providers BlackRock and Fidelity, received the SEC’s approval on Monday afternoon. According to fund sponsors, trading could begin as early as Tuesday. The SEC has not yet provided a comment on this development.
Ethereum, the native cryptocurrency of the Ethereum blockchain, is the second-largest crypto token globally, with a market cap of approximately $415 billion. This latest approval follows the earlier authorization of Ether futures ETFs last year and marks another step towards integrating cryptocurrencies into traditional U.S. finance.
Matt Hougan, Chief Investment Officer of crypto fund sponsor Bitwise, emphasized the growing recognition of crypto as a legitimate asset class. “Traditional asset management can no longer ignore crypto as an asset class,” Hougan stated. “I think you’re going to see effectively everyone embrace this space.”
As with Bitcoin, Ethereum ETF issuers are competing for investor interest by offering a relatively tight range of fees. Most products will have final expenses below 0.25%, with at least five issuers planning to waive fees initially. Notably, Grayscale Investments will maintain a 2.5% management fee for its large converted Ethereum ETF while introducing a “mini” version with the lowest post-waiver fee of 0.15%.
Grayscale had previously set its Bitcoin ETF management fee at 1.5%, down from an initial 2%, generating significant revenue for the company. This decision highlights the ongoing pricing strategies within the ETF market.
Despite these developments, Ether ETFs are not expected to attract as many assets as Bitcoin ETFs, which have seen over $17 billion in new investments since their launch. Tim Ogilvie, Global Head of Institutional at Kraken, a U.S. cryptocurrency exchange, suggested that Ethereum might be harder for investors to grasp compared to Bitcoin, often referred to as “digital gold.”
Hougan predicts that Ether ETFs will attract around $15 billion over their first 18 months on the market. However, he cautions that investment flows into the new funds could be unpredictable during the summer.
The SEC’s approval of Ether ETFs signifies a pivotal moment for cryptocurrency regulation and adoption in the United States. As cryptocurrencies become more integrated into traditional finance, their role in the investment landscape continues to evolve, highlighting the importance of regulatory clarity and innovation in this dynamic sector.
