ETFs
Ethereum ETF green light signals path forward for more crypto investment funds: TD Cowen
Last updated: May 26, 2024 at 12:00 p.m. EDT | 2 minutes of reading
The recent approval of Ethereum exchange-traded funds (ETFs) has opened the door to more crypto investment products, according to a study from TD Cowen’s Washington Research Group.
Although the speed of approval surprised some, the research group considered it an inevitable outcome after the approval of Bitcoin ETFs earlier this year.
Jaret Seiberg, a member of the TD Cowen team, noted that the approval of the Ethereum ETF came about six months earlier than expected, but was expected after the Securities and Exchange Commission (SEC) green light for crypto futures ETFs.
ETFs comprising a basket of crypto tokens could come next
Seiberg further suggested that over the next year we could see investment offerings comprising a “basket of crypto tokens,” encompassing Bitcoin and others, and potentially even more.
However, the approval of Ethereum ETFs does not indicate a broader change in the SEC’s stance on cryptocurrencies.
SEC Chairman Gary Gensler, known for his critical stance towards the crypto industry, issued a critical statement regarding the adoption of crypto legislation that could potentially diminish the agency’s authority.
Gensler highlighted the industry’s history of failures, fraud, and bankruptcies, attributing them not to a lack of rules but to many players in the crypto industry ignoring existing regulations.
His statement was released ahead of the Financial Innovation and Technology for the 21st Century Act, or FIT 21, passed in the United States House of Representatives.
Although Gensler’s agency may face challenges, TD Cowen predicts the SEC will maintain its Democratic majority through 2026.
The research group expects the agency to continue pursuing cases against cryptocurrency trading platforms that trade tokens considered unregistered securities by the SEC.
Spot Ether ETF Approval Proves ETH Is Not a Security
The recent approval of spot ETH ETFs potentially confirms Ether’s status as a non-security, according to industry experts.
As noted, Bloomberg ETF analyst James Seyffart declared that the approval of these commodity-based trust shares implies that the SEC explicitly recognizes Ether as not being a security.
Seyffart further suggested that this recognition could also extend to other tokens, thus strengthening their classification as commodities.
Digital assets attorney Justin Browder echoed Seyffart’s sentiment, stating that if Ether ETFs receive S-1 approval, which is the final condition for them to begin trading, it would settle the debate once for all, claiming that ETH is indeed not a security.
This is a key point. The reason the approval of spot ETH ETFs is a clear indication that the SEC does not consider ETH to be a security is that funds whose assets consist of 40% or more securities cannot register via an S-1 form; rather, they are considered investment companies and… https://t.co/Q2MkMsrqNg
– TuongVy Le 🗽🔭🍕🦄 (@TuongvyLe12) May 23, 2024
Adam Cochran, a partner at venture capital firm Cinneamhain Ventures, took the argument further, suggesting that this line of thinking could also apply to tokens from other projects.
On May 23, the SEC officially approved 19b-4 applications from VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy and Bitwise for the issuance of spot Ether ETFs.
Notably, several ETF issuers have removed staking from their final amendments.
Seyffart predicts that S-1 approvals could be granted in “a few weeks,” although he acknowledges that the process can take longer, typically stretching up to five months.
However, Bloomberg ETF analyst Eric Balchunas believes that a launch mid-June is certainly possible.