SEC Approves Ethereum ETF Application, Crypto Market Sees Major Breakthrough

On May 24th, Beijing time, the U.S. Securities and Exchange Commission ( SEC ) unexpectedly approved the 19 b-4 form application for the Ethereum spot ETF. This decision covers applications from several well-known financial institutions, including some leading asset management companies in the industry. Although ETF issuers still need to wait for the S-1 registration statement to take effect before they can officially start trading, this is undoubtedly a key step towards launching the Ethereum ETF in the market.

The SEC has just begun discussions with issuers regarding the S-1 form, and this process may require multiple revisions and some time. Market analysts speculate that completing this procedure could take several weeks. Based on past experience, ETFs typically require around 5 months for approval, and the Bitcoin ETF took at least 90 days. However, considering the current situation, the industry generally expects that the approval process for the Ethereum spot ETF will be relatively expedited.

It is worth noting that a certain asset management company has rapidly submitted a revised Ethereum spot ETF S-1 application form. Other potential issuers include several globally renowned financial institutions and crypto market investment companies.

This approval marks that the Ethereum spot ETF is only one step away from being launched, which is undoubtedly a milestone moment for ETH, the second largest cryptocurrency. At the same time, it also represents an important node in the further integration of the crypto market with traditional finance.

Surprisingly, just a week ago, the market was generally pessimistic about this. A well-known analyst had stated that anyone who thought these ETFs would gain SEC approval was simply crazy. However, within just a few days, this "crazy" idea surprisingly became a reality.

SEC's attitude makes a 180-degree turn

Behind this approval is a dramatic shift in the SEC's regulatory stance. Earlier this year, after approving the spot Bitcoin ETF, the SEC seemed to have little interaction with Ethereum ETF issuers. Market expectations were once very low, with the anticipation of the Ethereum ETF application being approved even dropping to around 10%.

Just two weeks ago, a well-known ETF analyst publicly stated that due to a lack of substantial communication with potential issuers and the uncertainty of Ethereum's regulatory status, the SEC is very likely to reject the application for the Ethereum spot ETF on May 23. The analyst even predicted that the Ethereum spot ETF might not be approved until the end of 2025.

However, in recent days, the situation has changed dramatically. At the beginning of this week, the SEC suddenly began to actively communicate with issuers, asking them to resubmit the 19b-4 form. This change came so unexpectedly that some departments within the SEC also seemed surprised by this 180-degree turnaround. Insiders revealed that this unprecedented situation is likely due to political considerations.

It is worth mentioning that this Wednesday, several applicant institutions modified their application documents, removing the content related to staking. In this regard, the head of a certain cryptocurrency research institution analyzed that if the speculation about a significant shift in the SEC's attitude is true, the regulatory body may be trying to find a balance between "ETH itself is not a security" and "staked ETH is a security." This view is consistent with the SEC's recent litigation cases and related investigative reports.

In addition, on May 22, the Ethereum spot ETFs of two financial institutions were officially listed on the website of the US Depository Trust & Clearing Corporation (DTCC), which is also seen by the market as a positive signal.

Analysts believe that the political factors of the U.S. election year may be an important reason for the approval of the Ether spot ETF, which also reflects the overall shift in the U.S. attitude towards crypto regulation. Recently, the U.S. government has released a series of friendly signals to the crypto market. On May 23, the U.S. House of Representatives passed the "21st Century Financial Innovation and Technology Act" (FIT21) by a significant margin, which aims to transfer regulatory authority over digital currencies from the SEC to the Commodity Futures Trading Commission (CFTC), which is considered more friendly. In addition, the bill will more clearly define the standards for whether crypto tokens are securities or commodities. Earlier, on May 16, the U.S. Senate also overturned the SAB 121 rule with a vote of 60 to 38.

From these trends, the shift in regulatory attitude may have more far-reaching implications than the approval of the ETF itself.

However, it should be noted that the Ethereum ETF may struggle to achieve the same level of appeal as the Bitcoin ETF. An ETF analyst estimates that the Ethereum ETF could only attract about 10% to 15% of the assets garnered by the Bitcoin ETF. "This would bring their asset size to between $5 billion and $8 billion, which is quite impressive for the first few years of a new product."

Review of the Integration of Ethereum into the Traditional Financial Market

Since a certain exchange first launched Bitcoin futures in 2017, the crypto market has begun its integration with traditional financial markets. The following are important milestones of Ethereum's gradual integration into traditional financial markets:

February 2021: A certain exchange launched Ether futures

About three years after the launch of Bitcoin futures, the exchange announced the launch of ETH futures, allowing various clients to hedge their Ether positions in the spot market.

May 2023: The issuer submitted and withdrew the Ether futures ETF application

Several issuers had submitted applications for Ether futures ETFs, but abandoned these plans about a week later. This recalls August 2021, when two companies planned to launch Ether futures ETFs, but withdrew their applications just two days later.

July/August 2023: Ether futures application resurfaces

At the end of July, an ETF company submitted an application to the SEC to restart the Ether futures ETF plan. In the following days, other fund groups also followed suit. However, the initial applicant seems to have lost its first-mover advantage and ultimately abandoned the competition.

August 2023: A cryptocurrency investment company won a lawsuit against the SEC

The court ruled that the SEC did not properly explain its different treatment of similar products when it rejected the company's application for a spot Bitcoin ETF. This ruling paves the way for subsequent ETF approvals, as the SEC has lost its reasonable grounds for rejection. The market expects that the company will also engage in similar legal disputes with the SEC regarding the Ethereum ETF.

September 2023: Publishers begin applying for spot Ether ETF

An asset management company first disclosed its plan for a US spot Ether ETF in 2021 and submitted another application in early September 2023. Other institutions have also followed suit. This initiated a 240-day SEC review period, with a deadline of May 23.

The final applicants for similar products include several globally renowned asset management companies and cryptocurrency investment institutions.

October 2023: Six Ether futures ETFs start trading in the United States

Multiple asset management companies launched Ether futures funds in October. Another investment company also started adding Ether futures contracts to its Bitcoin futures ETF. However, many industry observers believe that the initial capital inflows for these products are not ideal.

March 2024: A certain crypto asset management company applies for a spot Ether ETF and includes research content in the documents

The company submitted the application slightly later than other institutions. They also released a correlation analysis attempting to replicate the SEC's assessment method for Bitcoin. The company stated on social media: "We believe the results show a strong correlation between the ETH spot market and the ETH futures market, with a level similar to the SEC's analysis in the Bitcoin spot ETF approval order."

April 2024: A blockchain technology company sued the SEC, claiming it is attempting to regulate ETH as a security

The company claims in its lawsuit against the SEC that the regulatory agency is attempting to regulate ETH as a security, "even though ETH does not possess any security attributes."

Nowadays, with the SEC approving the Ethereum ETF, it seems that the official listing and trading is just a matter of time. This marks an important step in the integration of the crypto market with the traditional financial system and opens up new possibilities for the future development of Ethereum.