The US Securities and Exchange Commission (SEC) will approve the first exchange-traded funds (ETFs) that invest directly in Ether, the world’s second-largest cryptocurrency. According to filings and statements from asset managers, companies including 21Shares AG, Bitwise Asset Management Inc., BlackRock Inc., Invesco Ltd., Franklin Templeton, Fidelity Investments and VanEck have received approval. The SEC has not yet commented on this development.
This approval is a big step forward and shows that the United States is becoming more open to digital assets. It comes as Donald Trump, who is leading in polls for the upcoming presidential election, has shown his support for cryptocurrencies.
“Our clients want easy access to digital assets through exchange-traded products (ETPs), which offer convenience, liquidity and transparency,” said Jay Jacobs, head of US thematic and asset ETFs at BlackRock.
Rate competition between issuers
The SEC’s approval of spot Ether ETFs follows a recent change in May, when the agency began allowing Bitcoin ETFs after a court ruling in 2023. Ether is the main cryptocurrency on the Ethereum blockchain, which is important for cryptocurrency-based financial services. To attract investors, companies like BlackRock and Fidelity are temporarily reducing or eliminating fees on their Ether ETFs.
Bitcoin ETFs have been very successful, attracting around $17 billion in net inflows since their launch in January. However, expectations for Ether ETFs are more modest. Digital asset market maker Wintermute Trading Ltd. expects annual inflows of Ether products to be between $4.8 billion and $6.4 billion in the first year. They also suggest that actual demand could be lower, ranging between $3.2 billion and $4 billion.
Challenges and opportunities
Unlike Bitcoin, which is often considered digital gold, Ether does not have the same reputation. Additionally, Ether ETFs will not offer staking rewards, which are returns earned by helping to maintain the blockchain. This could affect investor interest as staking is a big part of the Ether ecosystem.
While Bitcoin is classified as a commodity, the SEC considers most other cryptocurrencies to be unregistered securities that should be regulated. Staking further complicates the classification of Ether, and SEC Chairman Gary Gensler has not clearly stated whether Ether should be considered a security.
Over the past year, Bitcoin has surged 132%, reaching a high of nearly $74,000 in March. Ether is up 88% over the same period. At 11:45 am on Tuesday in Singapore, Bitcoin was trading at $67,530 and Ether at $3,475.
In addition to Ether ETFs, VanEck and 21Shares recently filed for a product that invests in Solana, the fifth-largest cryptocurrency by market value. This shows that ETF issuers continue to look for ways to meet the growing demand for digital assets.
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