Ether ETF likely on the way as SEC acknowledges ETH as a commodity, says analyst

Bloomberg Analyst James Seyffart Argues That The SEC Implicitly Recognized ETH As a Commodity By Approving Futures ETFs

SEC Approves Ether Futures ETFs, Indicating Acceptance of Ether as a Commodity

In a significant move for the cryptocurrency industry, the United States Securities and Exchange Commission (SEC) has implicitly accepted Ether (ETH) as a commodity by approving Ether futures exchange-traded funds (ETFs). This approval suggests that a spot ETF variant for Ether is likely to follow this year, according to Bloomberg ETF analyst James Seyffart.

During a private webinar hosted by CryptoQuant, Seyffart highlighted the approval of Ether futures ETFs in October 2023. He noted that the SEC did not contest the classification of Ether as a commodity during the ETF registration process with the Commodity Futures Trading Commission (CFTC). Seyffart further emphasized the CFTC’s stance on Ethereum, stating, “The CFTC is blatantly calling Ethereum a commodity. They do not call them securities. […] The SEC has approved Ethereum futures ETFs. So again, Gary Gensler will not explicitly say whether Ethereum is a security or a commodity, but in their action, by approving those Ethereum futures ETFs, they’re implicitly accepting those Ethereum futures as commodities futures.”

Seyffart believes that the SEC chose not to challenge the commodity classification due to limited bandwidth. The first Ether futures ETFs in the U.S. were listed for trading on October 2, 2023, with nine funds launched by various investment firms on the Chicago Board Options Exchange, including ProShares, VanEck, Bitwise, Valkyrie, Kelly, and Volshares.

The classification of Ether is of great significance as securities and commodities ETFs are subject to different legal requirements, taxes, and regulatory burdens. If the SEC were to declare Ether as a security, it could potentially lead to a legal battle and the delisting of futures ETFs.

“It wouldn’t just be the SEC going against the crypto industry. If they call Ethereum a security, it’ll be going against their sister regulator, CFTC. […] That’s why I think we could see potential Ethereum ETFs approved this year as well,” noted Seyffart.

The SEC recently faced a similar dispute and lost a court case involving the exemption of the Spikes Index, a stock volatility index, from the definition of security futures. This exemption was argued to promote competition among such indexes. Seyffart pointed out that there is precedent to suggest that the registration of these products matters.

The SEC has a final decision deadline for spot Ether ETFs offered by VanEck, ARK 21Shares, and Hashdex in May 2024, with other decision deadlines occurring in the months that follow. However, before these deadlines, the SEC must disclose its verdict on spot Bitcoin (BTC) ETFs. Seyffart predicts that Bitcoin ETFs will be approved by January 10, 2024, and expects $10 billion to flow into Bitcoin ETFs within the next 12 months.

Q&A Content:

Q: What is the significance of the SEC’s approval of Ether futures ETFs?
The SEC’s approval of Ether futures ETFs implies that they acknowledge Ether as a commodity. This opens the doors for the potential approval of spot ETFs for Ether in the near future.

Q: How do securities and commodities ETFs differ in terms of legal requirements and regulations?
Securities and commodities ETFs face different legal obligations and regulatory burdens. They are also subject to different tax treatment. Therefore, the classification of a cryptocurrency as a security or a commodity has significant implications for investment products and their investors.

Q: Did the SEC explicitly declare Ether as a commodity?
No, the SEC did not explicitly declare Ether as a commodity. However, by approving Ether futures ETFs, they are implicitly accepting the futures contracts of Ether as commodity futures.

Q: What happens if the SEC categorizes Ether as a security?
If the SEC were to categorize Ether as a security, it would contradict the classification made by the Commodity Futures Trading Commission (CFTC) and potentially lead to legal disputes. It could also result in the delisting of Ether futures ETFs.

Q: When can we expect a decision on spot Bitcoin ETFs?
According to Seyffart, a decision on spot Bitcoin ETFs is predicted to be made by January 10, 2024. If approved, it could pave the way for significant investments in Bitcoin ETFs in the coming year.

Future Outlook and Investment Recommendations

Based on the approval of Ether futures ETFs and the expected approval of spot ETFs for Ether and Bitcoin, it is evident that cryptocurrency investments are gaining further legitimacy in the traditional financial system. As more ETFs are approved, it is likely that institutional investors will take a keen interest in these products, leading to increased liquidity and potential price appreciation for both Ether and Bitcoin.

Investors who are looking to diversify their portfolios and gain exposure to cryptocurrencies should consider allocating a portion of their investments to ETFs. It is important to conduct thorough research and choose reputable ETF providers that offer transparent and reliable investment products.

However, it is crucial to remember that investing in cryptocurrencies, even through ETFs, carries inherent risks. As with any investment, it is wise to consult with financial advisors or experts in the field and assess individual risk tolerance before making any investment decisions.


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