The Securities and Exchange Commission on Thursday paved the way for trading in exchange-traded funds that invest directly in the cryptocurrency Ether, putting the digital-asset industry on the cusp of a significant milestone.
In a first-of-its-kind blessing, the SEC signed off on a proposal by venues run by Cboe Global Markets Inc., Nasdaq and the New York Stock Exchange to list products tied to the world's second-biggest cryptocurrency.
The move, which had seemed unlikely as recently as last week, removes a key hurdle for spot Ether ETF trading in the U.S. Issuers now need a separate sign-off from the regulator; no deadline has been set for that decision.
Investment companies, including VanEck, ARK Investment Management, BlackRock Inc., and Fidelity Investments, are all vying for crucial first-mover advantage in the race to launch a spot Ether ETF.
Their interest has been piqued by billions of dollars gushing into new Bitcoin ETFs since January when the SEC signed off on trading in those products.
Shares of Coinbase gained as much as 4.1% in after-hours trading Thursday, while Robinhood shares rose nearly 3%. The crypto market response to the news was relatively muted – Ether traded around $3819.80 in the immediate aftermath of the release.
Beyond ETFs, the SEC's announcement on Thursday is laced with U.S. financial policy implications.
SEC Chair Gary Gensler has been ambiguous on his views over whether Ether is a security, stoking concerns that the agency was hardening its stance.
Crypto enthusiasts say they are worried about him trying to subject Ether — and potentially projects based on the Ethereum blockchain — to the agency's tough, expensive and onerous investor-protection rules.
Meanwhile, the Commodity Futures Trading Commission, the U.S.'s other main market regulator with jurisdiction over derivatives, has signaled that it doesn't consider Ether to be a security. The CFTC has for years allowed trading in Ether futures by CME Group Inc.
Significant Victory
As recently as last week, companies were banking the SEC would reject the Cboe plan — and potentially others — by Thursday's deadline. Additional SEC approval is still needed for the issuers, but the signoff is a significant victory for the industry.
