SEC Approves 8 Ethereum ETFs: Analysis of New Developments in U.S. Encryption Regulation and Market Prospects

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, the New York Stock Exchange Arca, and the Chicago Options Exchange BZX. This move marks an important step forward for spot Ether (ETH) exchange-traded funds, following the approval of Bitcoin ETFs in January of this year. This article will explore the process behind the SEC's approval of Ethereum ETFs, the latest trends in U.S. encryption regulation, and the potential impact on the market.

1. Review of the SEC Approval Process

Since the approval of the Bitcoin ETF, whether the Ethereum ETF can be approved has been the focus of the cryptocurrency community. Unlike Bitcoin, Ethereum has no theoretical upper limit in terms of supply. Under the PoS mechanism, the issuance of ETH is related to network activity, and the behavior of large holders may affect the price of ETH. These factors have previously caused the SEC to worry that the high concentration of Ethereum holders could exacerbate the risk of market manipulation.

To address the SEC's concerns, potential spot Ethereum ETF issuers have updated their documents to confirm that they will not stake ETH for profit. This move effectively reduces the risk of Ethereum being viewed as a security and paves the way for regulatory compromise.

On May 23, a document uploaded on the SEC website showed that the commission has approved the launch of spot Ethereum ETFs. However, these ETFs have not yet received trading permission. The SEC approved the 19b-4 forms related to these ETFs, but the issuers must wait for the S-1 registration statement to become effective before they can start trading.

Bloomberg Industry Research's ETF analyst Seyffart expects that it may take at least a week from approval to actual trading, but the specific time is still uncertain. In addition to the 8 approved ETFs, there are 6 Ethereum spot ETFs waiting for approval, and resolutions are expected to be made in the coming months.

2. New Developments in US Encryption Regulation Policy

The approval of this Ethereum spot ETF reflects 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 staked ETH as securities. This position aligns with the recently passed "21st Century Financial Innovation and Technology Act" (FIT21).

The FIT21 Act clearly distinguishes between digital assets regulated by the Commodity Futures Trading Commission (CFTC) and those regulated by the Securities and Exchange Commission (SEC). The Act emphasizes the legal nature differences between encryption assets as commodities and encryption assets with securities attributes, and specifically establishes different regulatory frameworks.

The approval of the Ethereum ETF and the passage of the FIT21 bill mark a significant shift in the regulatory landscape for cryptocurrencies in the United States. The SEC is seeking a balance in Ethereum regulation, attempting to distinguish the essence of Ethereum as a digital currency from the financial activities it may be involved in that could involve securitization.

3. The Impact of Approvals on the Cryptocurrency Trading Market

The approval of the Ethereum spot ETF had a significant impact on the market. After the news was announced, the price of Ethereum rose by 20% within a day, briefly surpassing $3800. Market volatility increased, with a total liquidation of $319 million across the network within 12 hours, including $122 million in ETH.

Cryptocurrency traders believe that if the long-term indicators remain favorable, Ethereum may retest the $5,000 price level. Standard Chartered Bank expects that the spot Ethereum ETF could attract inflows of approximately 239 million to 915 million Ether in its first year, equivalent to $15 billion to $45 billion.

Inclusion of ETH in spot ETF will provide a channel for a broader range of investors to participate in the encryption asset market, potentially leading to increased market liquidity and more stable prices. Moreover, the launch of Ethereum ETF may have a positive impact on the altcoin market, as many altcoin trading pairs in decentralized exchanges are against Ether.

The introduction of the ETF may also bring recognition of regulatory compliance, enhancing investor confidence. In the future, spot ETFs for other digital assets may also emerge, making encryption assets a more widely accepted investment trading variety. Overall, the inclusion of ETH in the spot ETF will bring broader recognition and participation to the encryption industry, having a positive and far-reaching impact on the cryptocurrency trading market.