SEC Approves 8 Ethereum ETFs: Analysis of New Trends in US Encryption Regulation and Market Opportunities

On May 23, the U.S. Securities and Exchange Commission (SEC) approved the applications for 8 Ethereum ETFs, which are set to be listed on Nasdaq, NYSE Arca, and Cboe BZX. This decision marks an important step towards the reality of spot Ether (ETH) exchange-traded funds, following the approval of Bitcoin ETFs in January of this year. This article will briefly outline the process surrounding the SEC's approval of Ethereum ETFs and analyze the latest trends in U.S. encryption regulation and market opportunities.

1. The Process Before and After SEC Approval

Since the approval of the Bitcoin ETF for trading, whether the Ethereum ETF can be approved has been a focal point of the cryptocurrency community. Unlike Bitcoin, Ethereum does not have a theoretical total supply limit. Under the PoS mechanism, the issuance of ETH is related to network activity, and the behavior of large holders may cause fluctuations in the price of ETH. The SEC has always believed that the high concentration of Ethereum holders may exacerbate the risk of market manipulation.

To address the concerns of the SEC, the potential issuers of the spot Ethereum ETF have updated their documents, confirming that they will not stake ETH for profit. This adjustment can be seen as a compromise to reduce regulatory scrutiny and market uncertainty.

On May 23, the SEC approved the applications for 8 Ethereum ETFs. However, these ETFs have not yet been granted trading permission. The issuers of the ETFs will also need to wait for the S-1 registration statement to take effect before they can begin trading.

In addition, there are six Ethereum spot ETFs pending approval. Among them, the decision for the ARK 21Shares Ethereum ETF will be announced tomorrow night, followed by a decision on the Hashdex Nasdaq Ethereum ETF on May 30. A decision will be made on the Grayscale Ethereum Trust on June 18, the Invesco Galaxy Ethereum ETF will be decided on July 5, the Fidelity Ethereum Fund will be ruled on August 3, and finally, the Ishares Ethereum Trust will make a decision on August 7.

2. New Developments in U.S. Encryption Regulatory Policies

The approval of this Ethereum spot ETF reflects, to some extent, a shift in the attitude of U.S. regulators towards cryptocurrency policy. The SEC views ETH itself as a cryptocurrency rather than a security, but considers products or services derived from staking ETH as securities.

On Wednesday, the U.S. House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT21), which aims to provide a set of rules for the regulatory system of digital assets. The FIT21 bill clearly defines which digital assets are regulated by the Commodity Futures Trading Commission (CFTC) and which are regulated by the Securities and Exchange Commission (SEC).

The approval of the Ethereum ETF and the passage of the FIT21 encryption currency bill mark a significant shift in the U.S. cryptocurrency regulatory landscape. The SEC is trying to seek a balance in the regulation of Ethereum (ETH), distinguishing between the essence of Ethereum as a digital currency and the potentially involved securitized products or services.

3. Opportunities for Development Brought by the Approval of the Cryptocurrency Trading Market

Affected by the approval of the ETF, the price of Ethereum has surged significantly in a short period of time. Data shows that Ethereum rapidly increased by 20% in one day, briefly reaching a price of 3800 dollars. In the past 12 hours, the entire network experienced liquidations of 319 million dollars, with ETH liquidations amounting to 122 million dollars.

Cryptocurrency traders suggest that if three long-term indicators continue to perform well, Ethereum may surge and retest the $5,000 price level that was breached in 2021.

The head of foreign exchange and digital asset research at Standard Chartered Bank expects that spot Ethereum ETFs will attract inflows of approximately 239 to 915 million Ether in the first year after approval, equivalent to $15 billion to $45 billion in capital inflows.

The launch of the Ethereum spot ETF will not only affect the price of ETH but may also have a positive impact on the altcoin market. This is because most altcoin trading pairs on decentralized exchanges (DEX) are paired with Ether. When the price of Ether rises, these altcoins tend to be passively pushed up as well.

The inclusion of ETH in a spot ETF will bring broader recognition and participation to the encryption industry, having a positive and far-reaching impact on the cryptocurrency trading market. In the future, corresponding spot ETFs for other digital assets may also emerge, making cryptocurrency assets a new asset class that is more widely accepted as an investable trading variety by the general public.