Shortly after it seemed that the ether ETFs would not come to market, new reports indicate that the U.S. Securities and Exchange Commission could approve them as early as next week. According to Reuters, talks between asset managers and regulators are in their final stages, and the ETFs could be available by July 4.
This represents a significant shift from just six weeks ago, when it looked as if the ether ETFs would not gain approval. The concerns at the time revolved around fraud and security issues stemming from the insufficient regulatory framework around cryptocurrency. Most of the laws regulating securities have been in place for decades and are ill-equipped to address crypto and digital assets. The SEC has been treating bitcoin as a commodity, but earlier this year seemed poised to consider ether a security.
Those concerns now seem to have been resolved, leaving only minor issues to be addressed prior to approval, Reuters reports. The swift turnaround has taken even seasoned observers by surprise.
“This shows that there not only is a lack of clarity in the space, but also how fast the industry moves,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research.
Competition with Bitcoin
Eight asset managers, including BlackRock, VanEck, Fidelity, and Franklin Templeton, are seeking SEC approval for their ether funds. These are largely the same firms that began marketing spot bitcoin ETFs after receiving SEC approval in January.
The bitcoin ETFs have been highly successful on the open market, with more than $14 billion in net inflows since their introduction. The ether ETFs face an uphill climb in replicating that success, with some industry experts expecting them to garner anywhere between 10% and 20% of the flows garnered by the bitcoin ETFs.
However, there are key differences that support the potential success of the ether ETFs, which are based on the Ethereum blockchain.
“I think the bitcoin ETF is going to end up being a bigger deal in the short to medium term, given its tenure,” said Hugentobler. “But there is also great potential for ether, given the applications that can be built with ethereum, the activity of tokenization on ethereum by big players, and smart contracts. When you add in the potential for yield, the ether ETF has the potential to pique more investors’ interest in the long term.”