Why is the approval of the Ethereum ETF so complicated?
The potential approval of an Ethereum exchange-traded fund (ETF) is now in the spotlight, following the recent approval of 11 Bitcoin ETFs. However, obtaining approval for an Ethereum ETF is complex due to unclear rules from the Securities and Exchange Commission (SEC) regarding how Ethereum should be regulated.
The SEC has not yet made a definitive decision on whether Ethereum is a security, which creates uncertainty surrounding the approval of an ETF for the cryptocurrency. Additionally, the SEC faced challenges when approving Bitcoin ETFs, leading to speculation as to whether Ethereum will face similar obstacles.
Despite these challenges, some optimists view recent successes, such as Grayscale’s Court of Appeals victory and the approval of the Ethereum Futures ETF, as positive signs. They believe that an Ethereum ETF approval is on the horizon. In the event of a rejection from the SEC in May, they anticipate an appeal, hoping that the SEC may change its stance to avoid complications.
Brett Tejpaul, the head of Coinbase Institutional, acknowledges the growing interest in an Ethereum ETF among Coinbase’s customers. However, the SEC’s reluctance to definitively classify Ethereum as a security adds complexity and may influence the fate of an Ethereum ETF.
According to analysts, opinions on the likelihood of an Ethereum ETF approval vary. Eric Balchunas is more optimistic, giving it a 70% chance, while James Seyffart is more cautious, estimating it to be around 60-65%. Despite considering both positive and negative aspects, they believe the odds are relatively better compared to other cryptocurrencies.
Bitwise, a company involved in Bitcoin ETFs, is also optimistic about the possibility of an Ethereum ETF. They highlight the necessary prerequisites, such as a robust market for Ethereum futures. However, they acknowledge that Ethereum’s complexity compared to Bitcoin makes it uncertain when approval might occur.
On the other hand, skeptics argue that the SEC’s historical delays in approving cryptocurrency matters raise doubts about a swift approval for an Ethereum ETF. They point out that since most cryptocurrencies are seen as investments, obtaining approval for Ethereum, which doesn’t fit that mold, could be challenging.
JPMorgan analysts share this skepticism, noting the uncertainty of the SEC treating Ethereum as a regular commodity for the upcoming approval in May. Adding to the caution, investment bank TD Cowen suggests that the SEC may prefer to observe the performance of Bitcoin ETFs before deciding on others. Meanwhile, the desire for an Ethereum ETF remains strong, but challenges persist. Some remain hopeful, while doubts linger, creating a waiting game for the crypto community.