US SEC Approves Exchange Applications to List Spot Ether ETFs

US SEC Approves Exchange Applications to List Spot Ether ETFs

Technology



The US Securities and Exchange Commission (SEC) on Thursday approved applications by Nasdaq, CBOE and NYSE to list exchange-traded funds (ETFs) linked to the price of ether, which could pave the way for the products start trading at the end of this year.

While ETF issuers must also get the green light before products can launch, Thursday's approval is a big surprise win for these companies and the cryptocurrency industry, which until Monday expected the SEC rejected the applications.

Nine issuers, including VanEck, ARK Investments/21Shares and BlackRock, hope to launch ETFs linked to the second-largest cryptocurrency after the SEC in January approved bitcoin ETFs at a key moment for the industry.

“This is an exciting time for the industry as a whole,” said Andrew Jacobson, vice president and chief legal officer at 21Shares, noting that it was “an important step” in getting the products to market.

Thursday was the deadline for the SEC to rule on VanEck's filing. Market participants were bracing for denial because the SEC had not engaged with them on the applications.

But in a surprise move, SEC officials on Monday asked the exchanges to quickly fine-tune filings, sending the industry scrambling to complete weeks of work in a matter of days, the sources said.

Reuters was unable to find out why the SEC appeared to have changed its mind.

“The introduction of spot bitcoin ETFs has already demonstrated significant benefits for the digital asset and ETF space, and we believe spot ether ETFs will similarly provide assurances for US investors,” said Rob Marrocco, Global Head of ETP Quotations at Cboe Global Markets.

Nasdaq and NYSE declined to comment.

When asked about ether ETFs by reporters at an industry event earlier Thursday, SEC Chairman Gary Gensler, a cryptoskeptic, declined to comment. An SEC spokesman said in an email announcing the approval that the agency would have no further comment.

Exchange filings had sought SEC approval for a rule change needed to list new products, but issuers still need the SEC to approve ETF registration statements detailing investor disclosures before to be able to start negotiating.

Unlike exchange filings, there is no set time period in which the SEC must rule on these filings. Industry participants said it was unclear how long that would take. Two sources familiar with the process said many issuers are ready to launch, but the SEC's corporate finance division has indicated it is likely to request changes and updates in the coming days and weeks.

The SEC rejected spot bitcoin ETFs for more than a decade over market manipulation concerns, but was forced to approve them after Grayscale Investments won a court challenge last year.

Sui Chung, CEO of CF Benchmarks, the index provider for several bitcoin and ether ETFs, said ether is more complex than bitcoin and it could take months for the SEC to review the filings. But because bitcoin ETFs offer a set template, “there's only so much slack” the SEC can do, he said.

A wide variety of investors, including hedge funds, wealth advisors and retail investors, have invested more than $30 billion in crypto ETFs.

Thursday's decision is another headwind to the cryptocurrency industry's efforts to boost mainstream finance. This week, the UK regulator also approved listed cryptocurrency products, while the US House of Representatives passed a landmark bill aimed at providing regulatory clarity for cryptocurrencies.

While this bill has yet to pass the Senate, its broad bipartisan support marks a major endorsement for the industry.

© Thomson Reuters 2024


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