ome of the world's largest asset managers want in on the Ethereum market. However, the United States Securities and Exchange Commission (SEC) had been reluctant to approve their applications for Ethereum exchange-traded funds (ETFs) due to concerns around staking rewards. Staking is when cryptocurrency holders lock up their assets to validate transactions and earn rewards, a process the SEC viewed as generating passive income.
Regulatory Hurdle Removed
To overcome this roadblock, BlackRock, Grayscale and Bitwise - who have collective assets under management of over $20 trillion - on May 23rd filed amended Form 19b-4 applications for their proposed Ethereum spot ETFs. The updated filings removed any reference to staking rewards, stating clearly that "neither the Trust, nor the Sponsor, nor the Ether Custodian nor any other person associated with the Trust will, directly or indirectly, engage in action where any portion of the Trust’s ETH becomes subject to the Ethereum proof-of-stake validation or is used to earn additional ETH or generate income or other earnings."
By sidelining the contentious issue of staking, the asset managers likely aimed to simplify the proceedings for SEC reviewers. Their move had the intended effect, as other hopeful issuers like Fidelity, VanEck, and Franklin Templeton quickly followed suit by filing similar amendments. This coordinated effort signaled the industry's commitment to addressing the regulator's worries, raising optimism around approvals.
Industry United for Crypto Investor Access
The solidarity displayed by BlackRock, Grayscale, and Bitwise, along with other ETF providers, underscores their conviction in crypto as an investable asset class that institutional investors are eager to gain exposure to. With over $10 trillion under management combined, these firms understand their customer base's massive demand for regulated crypto investment vehicles.
An Ether ETF would open the floodgates for pensions, insurers, banks, and other large financial players seeking low-cost, efficient access to the second-largest cryptocurrency by market value. Today, the only options for such investors are OTC trades of Grayscale's Ethereum Trust or holding Ether directly on an exchange, both with significant limitations.
By presenting a united front to push past the regulatory issue, asset managers aim to fulfill their role of representing investors' interests. Their amendments are a compelling signal that long-awaited approvals may be close. With the industry coalescing around a solution amenable to regulators, the odds of SEC Chair Gary Gensler and his team giving a green light are higher than ever.
Bright Outlook as Approval Decision Nears
The SEC is set to determine the resubmitted Ether ETF applications within 45 days of the amended filings. Market observers, including Bloomberg analysts Eric Balchunas and James Seyffart, have revised their odds of approval up to 75% based on the constructive shift in dialogue with the agency.
An Ethereum ETF launch would inject further momentum into the already bullish crypto markets if approved. Ether's price rose more than 17% on the day analysts turned positive, with Bitcoin reclaiming five figures soon after as optimism spread. Institutional money managers with billions under advisement are poised to incorporate exposure to Ether once regulatory uncertainty is retired.
After years of waiting, the stars seem aligned for America's $4 trillion asset management industry and millions of investors to get their first Ether ETF. Proponents have demonstrated that decentralized technologies need to be distinct from rules-based oversight by coming together around pragmatic solutions. A decision in the affirmative later this summer could mark the next giant leap forward for crypto's evolution into a fully mainstream investment class.
