Efforts to launch exchange-traded funds (ETFs) based on Ethereum’s spot price in the United States are encountering significant regulatory obstacles, mirroring Bitcoin’s lengthy path to approval.
The U.S. Securities and Exchange Commission (SEC) has yet to provide a definitive response to existing ETF applications, delaying crucial decisions that would enable investors to access ETH exposure without directly owning the asset. Notably, Grayscale and Franklin Templeton’s ETF applications, initially anticipated in April, have been postponed to June.
Similar setbacks have affected applications from Fidelity, BlackRock, VanEck, and ARK Invest, with dwindling hopes of approval amid indications that the SEC considers Ether a security rather than a commodity like Bitcoin.
The uncertainty surrounding Ethereum’s regulatory classification stems from remarks made by SEC Chair Gary Gensler, who declined to affirm ETH’s status as a security during a June 2023 congressional hearing. This departure from previous guidance has unsettled the crypto industry, particularly in light of earlier suggestions that the staking process could fall under securities rules.
Consensus recently challenged the SEC’s stance on Ethereum, asserting that the commission’s regulatory overreach jeopardizes America’s leadership in internet innovation.
Michael Saylor, MicroStrategy’s executive chairman and a vocal Bitcoin advocate, predicts that Ethereum-based ETFs will never materialize. He argues that Ethereum, along with other altcoins, will be classified as unregistered cryptoasset securities, rendering them ineligible for spot ETF inclusion or acceptance by mainstream institutional investors.
Despite Saylor’s skepticism, the lack of dialogue between the SEC and ETF applicants exacerbates regulatory uncertainty. Unlike Bitcoin ETF issuers, Ether ETF hopefuls are reportedly not receiving the necessary feedback to finalize their products, hindering progress in the approval process.
While regulatory inertia persists in the U.S., other jurisdictions are seizing opportunities in the burgeoning Ethereum ETF market. Hong Kong recently launched an ETH ETF, potentially attracting investors from mainland China. Meanwhile, ETFs based on Ethereum’s spot price have gained approval in Canada, Switzerland, Sweden, and Germany, with some offering additional yield through staking returns.
As global Ethereum ETFs amass billions in assets under management, the United States risks falling behind in crypto investment opportunities due to regulatory ambiguity.
