Nearly There: The Final Countdown to Ethereum Spot ETF Launches

TLDR

• Bitwise executive says Ethereum ETFs are “close to the finish line” for approval
• The SEC is reportedly open to discussions about crypto ETFs beyond Bitcoin and Ethereum
• Bloomberg analyst Eric Balchunas suggests July 18 as a possible launch date for Ethereum ETFs
• Several asset managers submitted amended S-1 filings for their Ethereum ETF applications
• Minor updates in the amendments include fee waivers and seed transaction details

The long-awaited approval of spot Ethereum exchange-traded funds (ETFs) in the United States appears to be drawing closer. Recent developments suggest that these investment products could hit the market as soon as this month, marking another milestone in the integration of cryptocurrencies into mainstream finance.

Katherine Dowling, chief compliance officer at Bitwise, a crypto asset manager, told Bloomberg that Ethereum ETFs are “close to the finish line.” She noted that there are “fewer and fewer issues that are being vetted back and forth between issuers and the SEC” in the S-1 amendments, indicating progress towards approval.

Bitwise Chief Compliance Officer Katherine Dowling discusses her firm’s Ether ETF application and the potential for new products tied to crypto https://t.co/hKIvliRCnX pic.twitter.com/PvMFeG4wWU

— Bloomberg Crypto (@crypto) July 9, 2024

While an exact launch date remains uncertain, Bloomberg ETF analyst Eric Balchunas has suggested July 18 as his “best guess” for when these funds might start trading. However, he cautioned that the Securities and Exchange Commission’s (SEC) plans are still unclear.

The push for Ethereum ETFs follows the successful launch of spot Bitcoin ETFs earlier this year. Those funds have attracted approximately $15 billion in inflows over their first six months of trading, demonstrating significant investor interest in cryptocurrency-based investment products.

In preparation for potential approval, several major asset managers submitted amended S-1 filings for their Ethereum ETF applications on July 8. These included BlackRock, Fidelity, Grayscale, 21Shares, Franklin Templeton, and VanEck. Bitwise had filed its amendment earlier on July 3.

The recent amendments included minor updates, primarily focusing on fee waivers and seed transaction details. For instance, VanEck announced its intention to waive sponsor fees for the first $1.5 billion over one year, while Bitwise introduced a six-month, $500 million waiver. Franklin Templeton maintained its previously announced six-month, $10 billion waiver.

Seed investment details were also provided in some filings. Franklin Templeton reported that seed capital investor Franklin Resources Inc. purchased 4,000 shares at $25 per share for a total of $100,000. VanEck and BlackRock disclosed their trusts had acquired 2,929 ETH and 3,031 ETH respectively from their seed investments.

These updates, while seemingly minor, are crucial steps in the regulatory process. They demonstrate the issuers’ readiness to launch their products and their efforts to make these funds attractive to potential investors.

Dowling also revealed that the SEC has been open to discussions about crypto ETFs beyond just Bitcoin and Ethereum. “We’ve actually dialogued with the SEC about the possibility of what’s coming down the pipe with new products,” she said, describing the communication as “quite welcoming.”

This openness from the SEC could pave the way for a broader range of cryptocurrency-based investment products in the future. However, Dowling and other analysts caution that approval for ETFs based on cryptocurrencies other than Bitcoin and Ethereum may take considerably longer and might depend on changes in SEC leadership.

As evidence of growing interest in diverse crypto ETFs, VanEck and 21Shares recently filed applications for spot Solana ETFs. While these applications are a sign of the industry’s ambitions, they are likely to face a longer and more uncertain approval process compared to the Ethereum ETFs currently under consideration.