What Still Needs to Happen Before Spot Ether ETFs Can Trade

There’s a lot of excitement over the possibility that a spot ether exchange-traded fund (ETF) may be around the corner. Here’s what still needs to happen before one may launch.

You’re reading State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. Click here to sign up for future editions.

Following BTC

The narrative

The U.S. Securities and Exchange Commission (SEC) seems poised to approve spot ether exchange-traded funds (ETFs), and they could begin trading as soon as this week – though there’s still a bit of work left to be done.

Why it matters

The crypto industry has pushed for spot ether (ETH) ETFs for years, nearly as long as it’s pushed for spot bitcoin (BTC) ETFs. The SEC approved the bitcoin products in January after a decade of rejections, but did not seem ready to approve the ether counterparts until May. As with the spot bitcoin ETFs, advocates for spot ether ETFs argue they’ll create a safe and regulated investment vehicle that will grant the general public exposure to the second-largest cryptocurrency by market cap without requiring them to invest in it directly.

Breaking it down

A handful of would-be issuers filed amended S-1 forms on Friday and Monday, suggesting progress is being made. Notably, the filings did not contain fee information, so there’s likely to be at least one more round of comments from SEC staff before trading can begin. Invesco and Galaxy published a fee – 0.25% – on Tuesday. VanEck was the only would-be issuer to publish a fee prior to the latest round of updates.

To be clear, there’s no firm timeline for approval. Unlike the 19b-4 filings the SEC approved in may, there’s no imminent final deadline the agency must meet for a final decision, and so the back-and-forth between regulators and issuers could wrap up as soon as Friday or take a few weeks still. One individual familiar with the process told CoinDesk they expected the dialogue to continue for a few weeks.

The filings also do not detail expense ratios. If amended filings include those key details, that may signal they are the final set of amendments.

Should the SEC provide feedback by the end of the day Tuesday, it’s entirely plausible the issuers will file a final set of amended forms by Wednesday. They would have to include fee information and any other details required by the regulator. For the spot bitcoin ETFs, it took the SEC two days to send out the final approvals after issuers had submitted fees. If that holds this time round, provided issuers submit their fees by Wednesday, it is possible that an approval could be in by Friday.

The products could begin trading relatively quickly afterward.

Hours before the spot bitcoin ETFs were approved by the SEC in January, one of the listing exchanges, Cboe, added the funds to its “New Listings” page, saying that was “standard procedure” before the approval of a new ETF. If so, given that five of the potential ether ETFs will be listed on Cboe, we may well see a similar situation happening on the day that these ETFs receive approval.

Stories you may have missed

This week

• 14:00 UTC (10:00 a.m. EDT) Federal Reserve Chairman Jerome Powell testified before the Senate Banking Committee.

• 18:00 UTC (2:00 p.m. EDT) Following a federal judge’s ruling last week, there was a scheduling conference in the SEC’s ongoing case against Binance.

• 14:00 UTC (10:00 a.m. EDT) Fed Chair Powell is back, this time before the House Financial Services Committee.

• 14:00 UTC (10:00 a.m. EDT) The Senate Agriculture Committee is holding a hearing on digital asset regulation with CFTC Chair Rostin Behnam.

• 17:00 UTC (1:00 p.m. EDT) The Department of Energy’s Energy Information Administration is holding a webinar on its proposal to collect information from crypto mining firms.

• 14:00 UTC (10:00 a.m. EDT) The Senate Banking Committee will hold its confirmation hearing for CFTC Commissioners Christy Goldsmith Romero and Kristin Johnson, who have been nominated to chair the Federal Depository Insurance Corp. and be an assistant secretary for the U.S. Treasury Department (respectively); a renewal hearing for SEC Commissioner Caroline Crenshaw to serve another term and Gordon Ito to join the Financial Stability Oversight Council.

• 14:00 UTC (10:00 a.m. EDT) There will be a hearing in the U.S. criminal case against Roman Storm. Storm’s attorneys have asked for his trial to be postponed from September 2024 to January or February 2025.

Elsewhere:

• (Time) Time Magazine’s Andrew Chow spoke to dozens of residents of Granbury, Texas, who have suffered from unusual medical conditions. A local Bitcoin mine appears to be the likely suspect – the noise from cooling fans may be causing people’s bodies to exhibit stress responses (this isn’t unheard of).

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.

You can also join the group conversation on Telegram.