Spot Ether ETFs Get the Green Light, But Gary Gensler Says No—Here's Why

On May 23, the United States Securities and Exchange Commission (SEC) gave the green light to spot Ether exchange-traded funds (ETFs). However, the approval process for these ETFs notably differed from that of the spot Bitcoin ETFs approved earlier in the year. This article delves into the reasons behind these differences, the implications for the crypto market, and the reactions from industry experts and the crypto community.

Differences in Approval Processes

When the SEC approved spot Bitcoin ETFs in January, the decision involved a vote by a five-member committee, including SEC Chief Gary Gensler. In contrast, the recent approval of spot Ether ETFs did not involve such a vote. Instead, the decision was made by the SEC's Trading and Markets Division, bypassing the need for a committee vote. This procedural variation has raised questions about the motivations and potential implications of this approach.

Details of the Ether ETF Approval

The SEC approved 19b-4 filings from several major financial institutions, including BlackRock, Fidelity, Grayscale, Bitwise, VanEck, Ark, Invesco Galaxy, and Franklin Templeton. Despite the official approval, the SEC provided limited commentary, issuing a formal statement that read:

This statement underscored the delegated authority used in this decision-making process, which differs from the more public voting procedure used for Bitcoin ETFs. This subtle yet significant difference in approval processes has sparked curiosity and speculation within the crypto community.

Expert Analysis on the Approval Process

Industry analysts have provided various interpretations of the SEC's differing approaches. Bloomberg ETF analyst James Seyffart highlighted that the use of delegated authority is not uncommon and that requiring an official vote for every decision would be impractical. This analyst suggested that the SEC's method for approving the Ether ETFs falls within typical regulatory practices and should not be viewed as an anomaly.

However, not all observers agree with this assessment. Some industry participants believe that the use of delegated authority might be a strategic move to avoid exposing the decision to political scrutiny. They argue that a formal voting process could reveal political divides within the SEC, potentially complicating future regulatory decisions.

Community Reactions and Speculations

The crypto community has expressed mixed reactions to the SEC's approval process for spot Ether ETFs. Some community members have voiced concerns that the delegated authority was used to obscure potential political influences on the decision. One observer noted that an SEC commissioner could challenge the approval within ten days, suggesting that the process was designed to minimize transparency.

Others have attributed the SEC's approach to broader political and regulatory factors. These include pressures from upcoming elections, the implementation of environmental, social, and governance (ESG) rules, and other political considerations that might have influenced the decision-making process.

Timing and Market Debut Differences

Another key difference between the approval processes for Bitcoin and Ether ETFs lies in their market debut timing. All 11 Bitcoin ETFs began trading the day after their approval, having received S-1 form clearance. In contrast, the spot Ether ETFs may take weeks or even months to debut on exchanges, as they are still awaiting S-1 SEC registration.

This delay in the market debut of Ether ETFs adds another layer of complexity to the situation. The S-1 form clearance is a crucial step in the process, and the timeline for this clearance remains uncertain. Investors and industry stakeholders are closely monitoring this development, as the debut of Ether ETFs will be a significant event in the crypto market.

Implications for the Crypto Market

The approval of spot Ether ETFs marks a significant milestone for the cryptocurrency market, potentially paving the way for increased institutional investment in Ether. However, the differing approval processes for Bitcoin and Ether ETFs highlight the complexities and potential political dynamics within the SEC.

The SEC's decision to use delegated authority for the Ether ETF approvals may signal a more streamlined approach to future crypto ETF approvals. However, it also raises questions about transparency and the potential influence of political factors on regulatory decisions. As the crypto market continues to evolve, these issues will likely remain at the forefront of discussions among investors, regulators, and industry participants.

Bottom Line

The approval of spot Ether ETFs by the SEC, despite the absence of a formal vote by the commission, underscores the evolving regulatory landscape for cryptocurrencies. While the differing approval processes for Bitcoin and Ether ETFs have sparked debate and speculation, they also reflect the SEC's efforts to navigate the complex and rapidly changing crypto market.

As the debut of spot Ether ETFs approaches, the market will be watching closely to see how these developments unfold. The implications for the broader cryptocurrency market and the potential for increased institutional investment in Ether are significant. Understanding the nuances of the SEC's decision-making process will be crucial for stakeholders looking to navigate this dynamic and evolving market.