The United States Securities Commission (SEC) is all set to greenlight the first exchange-traded funds (ETFs) based on Ether (ETH) futures in a big win for the crypto space.
Nearly a dozen companies have expressed interest and filed applications with the SEC to launch ETFs.
According to sources familiar with the matter, the regulator will not block or oppose products. This comes as a major relief to companies who have filed with the Securities and Exchange Commission, including Bitwise, Roundhill, ProShares, and Volatility Shares. However, it is still unclear which funds would receive the nod from the SEC. Officials and sources close to the matter have stated that approvals could come as early as October, but the SEC has yet to comment on the matter. Ether (ETH) is the native token of the Ethereum blockchain and is the world’s second-largest cryptocurrency in terms of market capitalization, second only to Bitcoin.
The SEC’s Changing StanceThe Securities and Exchange Commission has repeatedly blocked previous attempts at an ETF based directly on a cryptocurrency. However, in late 2021, the regulator began permitting trading in a fund that involved Bitcoin futures contracts trading on the Chicago Mercantile Exchange. Since then, speculation has been growing that the Securities and Exchange Commission would allow a product with Ether futures which would also be traded on the exchange.
However, despite the buzz and excitement, the Securities and Exchange Commission has dragged its feet when it comes to approvals for a product that involves derivatives in Ether. Data from CoinGecko shows that ETH commands a market value of just under $200 billion, second only to Bitcoin, which has a market value of nearly $700 billion.
However, the Securities and Exchange Commission is still pushing back against Bitcoin-based ETFs and is locked in a tense standoff with the crypto industry on the matter. Grayscale Investments has already challenged the Securities and Exchange Commission’s rejection of its application to convert its Bitcoin trust into an ETF. A panel of US federal appellate court judges will be deciding on the matter soon.
On its part, the Securities and Exchange Commission has argued that the crypto space is fraught with several hazards. The regulator has repeatedly expressed concerns about price manipulation and insufficient liquidity when it comes to crypto. The regulator has also flagged Bitcoin’s volatility as a threat, especially to newer investors. However, several firms, including BlackRock, have filed applications with the Securities and Exchange Commission to list ETFs based on Bitcoin. BlackRock’s filing had a considerable impact on the market, pushing the price of Bitcoin above $31,000. However, since then, the price has hovered around the $29,000 mark.
Valkyrie’s ETF FilingAsset management firm Valkyrie has also submitted an application to the United States Securities and Exchange Commission for an Ethereum (ETH) futures exchange-traded fund. The application signals the asset manager’s intention to move beyond just offering Bitcoin futures ETFs. Valkyrie had filed the application on the 16th of August. The application stated that the ETF would not directly invest in ETH, purchasing ETH futures contracts instead.
The application also outlines a specific limit on the ETF’s investment in ETH futures contracts. As per the application, the investments are capped at 8000 contracts per month. This has been done to comply with position limits set by the Chicago Mercantile Exchange. If the Securities and Exchange Commission approves the application, investors will be able to speculate on ETH’s future price movements via the ETF. Valkyrie also plans to invest in cash, cash-like instruments, or high-quality securities. These include government-issued bonds, bills, notes, money market funds, and corporate debt securities.
Valkyrie is one of several asset managers looking for approval for an Ether futures ETF. Others include VanEck, Grayscale, Bitwise, ProShares, Volatility Shares, and Round Hill Capital.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
