Following months of debate and postponed decisions, the U.S. Securities and Exchange Commission (SEC) has formally approved spot Ether (ETH) exchange-traded funds (ETFs).
This permission, however, is now restricted to 19b-4 filings; therefore, actual trading authorization could take several more months as issuers’ S-1 applications are under consideration. According to Bloomberg’s James Seyffart, this broad horizon could cause the wait for real trading authorization to last longer.
Although the sector has generally welcomed this action, especially given the previous approval of spot Bitcoin (BTC) ETFs, several analysts warn that spot Ether funds could have more complicated consequences than expected.
Ether and Bitcoin ETFs Fundamental Consensus Differences
The consensus systems of their respective blockchains define a fundamental distinction between ETFs supported by ETH and those backed by BTC. Because of its somewhat simple architecture, lack of smart contract capability, and dispersed finance (DeFi) environment, Bitcoin’s proof-of-work approach encourages users to hold the coin.
On the other hand, Ethereum’s switch to a proof-of-stake architecture supports a vivid multi-billion dollar DeFi scene in which ETH is intended for on-chain use. Data scientist Flipside Crypto Carlos Mercado voiced worries about ETH being held in these funds possibly having negative effects. “Holding ETH idly is like hoarding gallons of gasoline—it’s not the best use of the asset,” Mercado said.
Although all staking language has been eliminated from Ethereum ETF proposals’ most recent spot, this could help solve this problem. Furthermore, the SEC’s crackdown on staking service providers like Coinbase is adding to the uncertainty about U.S. crypto staking acceptance.
Tom McClean, the quantitative developer for Vega Protocol, pointed out that although eliminating staking elements from ETFs helps to address centralizing issues, it does not fix the whole problem.
ETFs will probably acquire, hold, and sell ETH without staking, leaving large volumes of ETH unstated and useless. “This introduces the risk of large amounts of ETH remaining both unstoked and unproductive in the system in general, as it will also not be used for gas, etc.,” McClean said.
More optimistically, McClean said, this scenario might inspire issuers and investors to look for more defined staking rules. Head of Business Development (APAC) Justin d’Anethan of Keyrock reiterated this stance, contending that accepting these filings could show that Ether is not considered security by authorities.
A gambling guy would find this as unambiguous evidence that Ether is not a security according to authorities. For many investors and Ethereum users, this would free weight from their shoulders,” said d’Anethan.
These signals notwithstanding, it is still unknown how the SEC finally sees Ether as a financial tool. Although the current scene points to a change in regulatory viewpoint, the Wall Street regulator’s ultimate position is yet to be expected.
Approval of spot Ether ETFs signals both a milestone and a cause of controversy as the crypto sector negotiates these changes. It illustrates the intricate interaction between innovation and control in the developing digital asset ecosystem.
