Ethereum
Ethereum ETF Approval: Here’s What You Need to Know About Today’s Deadline
The chances of approval increased from 25% last week to 75%.
There is a question that is at the center of the crypto industry today: will Ethereum spot ETFs be approved?
Today, May 23, is a key date for the Ethereum Spot Exchange Traded Fund (ETF) approval process as the U.S. Securities and Exchange Commission (SEC) prepares to rule on VanEck’s Ethereum spot ETF application, the first of several similar applications.
It is expected that if the US securities regulator approves the VanEck product, it will approve the other petitions. It can even approve them all at once, as the agency did with Bitcoin products.
Investors expect that Ethereum spot ETFs will open the floodgates to billions of dollars of inflows from institutional investors, which has pushed the price of ETH to rally more than 27% last week, before the decision.
However, even if approved, it does not mean that Ethereum ETFs will begin trading immediately.
According to Bloomberg Intelligence analyst James Seyffart, “There are many misconceptions that “approvals” mean the immediate launch of Ethereum ETFs. This is not necessarily the case. There will be days (at a minimum), probably at least weeks, and potentially months between approval and launch here.
ETF Approval Steps
Before Ethereum ETFs begin trading, the SEC must approve two forms filed by applicants, 19b-4 and S-1.
Form S-1 is a registration statement used by companies to provide information about their financial condition, risk factors and business operations, before making it public. In contrast, Form 19b-4 is specifically designed for approval of rule changes by self-regulatory organizations (SROs) such as exchanges.
“With respect to ETFs, Form 19b-4 is used to propose and detail the specific structure, mechanics and operational guidelines of the ETF, which directly impacts SEC approval of trading of the product on an exchange,” Asset Insight Partners said. senior analyst James Fabien. “While the S-1 is indeed crucial for transparency and investor protection, it often serves more as a compliance formality. »
Without an approved Form 19b-4, the ETF cannot be launched, regardless of the information provided in the S-1.
The SEC is not making its decision on Form 19b-4 until today, while Form S-1 may take longer. If both forms are approved, ETF applicants can continue their offering and listing process.
ETH ETF Trading Calendar
Even with SEC approval, launching an ETH ETF could take weeks or months due to additional regulatory measures.
Crypto and ETF analyst Michael Van de Poppe, CEO of MN Trading, suggested a longer time frame for Ethereum ETFs. He said: “It is more likely that it will take 2-3 months for the approval of the Ethereum ETF to take place. »
Until last week, Bloomberg Intelligence analysts estimated the chances of an Ethereum ETF being approved at 25%. This week, however, they increase chances at 75%
Van de Poppe told The Defiant: “The chances of getting approval have increased, however, the likelihood of approval within 24 hours seems strange and almost impossible to establish. »
Reasons Behind Higher Ratings
Several factors contributed to the Ethereum ETF’s higher chances of approval. A notable reason, according to analysts, was former President Donald Trump’s endorsement of crypto as part of his political campaign. Additionally, two key crypto bills, HJ Res. Act 109 and the Financial Innovation and Technology for the 21st Century (FIT21) Act have garnered bipartisan support, signaling a shift in lawmakers’ attitudes toward cryptocurrency.
Jake Chervinsky, General Counsel, Variant Fund believes that the approval could be influenced by politics, and “crypto has been winning the political battle for months.” Chervinsky speculated that “the Biden camp saw how many voters Trump could win over with just one pro-crypto comment and decided to pivot.”
Daniel Enright, head of ecosystem at LightLink, also cited the chances of approval of the Ethereum ETF to increase under political pressure. “If this is now a political and electoral issue, there will be enormous pressure to get this approval. »
Looking ahead, Van de Poppe believes that the next few months could serve as a preparatory period. “Following these delays, the summer could be a period of preparation towards the approval of the Ethereum ETF.”
In terms of approval probabilities, he added: “I estimate there is a 70-80% chance of approval within 2-3 months, and around 10-20% chance in the next few days. »
Remove the last obstacles
In recent days, ETF applicants have been revise their applications, making changes that may create obstacles to product approval. One major change is the removal of staking from ETH services.
Nasdaq submitted an updated Form 19b-4 for BlackRock’s iShares Spot Ethereum ETF on Wednesday, just a day after the CBOE submitted amended forms for ETFs offered by Franklin Templeton, Fidelity, VanEck and Invesco Galaxy . These amendments specifically removed staking rewards, a process by which investors lock up their Ether to help secure the network and validate blockchain transactions in exchange for rewards.
According to analysts, removing staking from the filing eliminates the possibility that if the SEC classifies ETH as a security, it would hinder the approval of Ethereum ETFs.
Financial lawyer Scott Johnsson said the removal of staking was to be expected. “The most important signal here is that there is no change in the trust structure and disclosures provided by commodity licensors. All signs point to the SEC laying out its case for ETH as guarantee.”
But there is a glimmer of hope.
Fabien explained to The Defiant that avoiding staking could be beneficial for Ethereum. “One of the major risks for ETH is the high percentage of its supply staked on platforms like Lido, Coinbase and others. With the SEC potentially banning staking, it is likely that institutional demand will increase. will move towards holding simple ETH instead of staked ETH.”
Fabien added that this could “help reduce risks associated with a concentrated supply of staked ETH, such as vulnerabilities to consensus exploits.”
If ETF applications are rejected, applicants have two options, Ryan Lee, chief analyst at Bitget Research, told the Defiant. “First, they can reapply and try to correct the reasons the SEC gave for denying the application. Second, they can seek relief in court, a move that worked well when Grayscale Investments took the market regulator to court.
Next, Solana ETFs?
According to Enright, once initial approval of crypto assets beyond Bitcoin ETFs occurs, it could pave the way for other cryptocurrencies to gain similar recognition.
He said: “Once Pandora’s box of legitimizing crypto assets beyond BTC has been opened, we could then see leaders in other sectors of the crypto market being recognized.” This recognition could extend to cryptocurrencies such as “…Solana, Chainlink ETF”.
However, Nate Geraci, president of The ETF Store, has a different view. He believes that the existence of a Solana spot ETF is quota according to specific prerequisites.
“A Solana spot ETF will not exist until a Solana futures product traded on the Chicago Mercantile Exchange is listed or Congress establishes a legitimate cryptocurrency regulatory framework. “
Nonetheless, Cinneamhain Ventures partner Adam Cochran said that instead of Solana, other cryptocurrencies could be next to be included in a spot ETF. Cochran tweeted“I think you get LTC and DOGE first. Much lower demand, but cleaner paths.”