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In what constitutes a major step in the ongoing commoditization and financialization of the entire crypto sphere, which serves to bestow a sheen of legitimacy to the still-nascent sector, the apex financial regulator in the US has finally approved the listing of several spot Ethereum ETFs.
We noted earlier this week that the SEC had asked Nasdaq, CBOE, and the New York Stock Exchange (NYSE) to amend their applications to list spot Ethereum ETFs, potentially signaling its readiness to approve these investment vehicles.
BOOM!! APPROVED! There it is. The SEC just approved spot #Ethereum ETFs. What a turn of events. It’s really happening.
h/t @PhoenixTrades_ pic.twitter.com/KQ39mDyCbT
— James Seyffart (@JSeyff) May 23, 2024
To wit, the SEC has now formally approved a number of spot Ethereum ETFs, including the Grayscale Ethereum Trust, the Bitwise Ethereum ETF, the iShares Ethereum Trust, the VanEck Ethereum Trust, the ARK 21Shares Ethereum ETF, the Invesco Galaxy Ethereum ETF, the Fidelity Ethereum Fund, the Franklin Ethereum ETF.
None of the approved ETFs, however, allow for staking on the Ethereum network. As a refresher, under Ethereum’s PoS transaction authentication mechanism, validators lock-up or stake specific Ether balances in specialized nodes to win the chance to authenticate a particular batch of transactions, thereby receiving the transaction fee as reward.
While the lack of staking will diminish the yields of spot Ethereum ETFs, the limitation appears to be a necessary opportunity cost to ensure sufficient liquidity for smooth fund operations, especially as Ethereum’s standard exit queue limits the number of stakers who are allowed to exit on a given day.
Of course, today’s development comes as crypto regulation has become a heated topic on the hill. On the 22nd of May, the US House of Representatives passed the Financial Innovation and Technology for the 21st Century Act or FIT21, which aims to bestow a commodity status under the regulatory eye of the CFTC to digital assets if their associated blockchains or digital ledgers are “functional and decentralized.” As per the bill, a digital asset is to be considered sufficiently decentralized if “no person has unilateral authority to control the blockchain or its usage, and no issuer or affiliated person has control of 20% or more of the digital asset or the voting power of the digital asset.”
After initially threatening to veto the bill, the US President Biden eventually chose to publish a statement, pointing out the potential flaws in the bill. The SEC Chair, Gary Gensler, who loses a major chunk of his regulatory authority over the crypto sphere if FIT21 becomes a law, also chose to publish a hard-hitting statement, alleging that the bill would create “regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk.”
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