Three Common Queries Following SEC’s Approval of ETH ETF in the United States
The US Securities and Exchange Commission (SEC) recently approved the listing of an Ethereum native token ETF, which has raised questions among industry observers regarding the motivation behind this decision and its potential impact on Ethereum and other major cryptocurrencies.
CoinDesk’s editorial aims to address several common concerns.
Question 1: Are there political motivations behind the decision?
Changes in cryptocurrency regulations?
Impact of legislative actions
Former President Trump’s support
Question 2: What is the impact on Ethereum?
Increased institutional interest
Potential changes in market dynamics
Clarifying regulatory status
Positive impact on the Ethereum ecosystem
Staking economy
Strengthening Ethereum’s position
Question 3: What opportunities are there for other blockchains?
Prospects for other chains
Financial institutions need support
The timing of the SEC’s approval has sparked speculation about the political motivations behind it. Just a few days before the announcement, the US House of Representatives passed the important cryptocurrency bill FIT 21. Additionally, Congress has recently made efforts to repeal the controversial SEC cryptocurrency custody accounting rules, indicating a possible shift in the regulatory environment.
In these legislative actions, the Democratic Party has actively participated, suggesting a softening stance by the US government towards cryptocurrencies. President Biden’s decision not to veto the cryptocurrency market structure bill FIT 21 shows a significant concession. This political background may influence SEC Chairman Gary Gensler’s attitude towards cryptocurrency regulations, possibly considering a stricter stance as a political burden.
Furthermore, former President Trump’s recent support for cryptocurrencies has also had an impact. Gensler may believe that continuing to reject an ETH ETF would be politically disadvantageous, especially considering Trump’s support.
The approval of the ETH ETF is expected to significantly increase institutional interest in Ethereum. This move not only provides recognition but also offers a familiar investment tool for various investors, including individual 401(k) holders and large hedge funds.
The co-founder of Framework Ventures, Michael Anderson, points out that many institutions may be eager to adjust their strategies and infrastructure to accommodate the new Ethereum ETF. The entry of these funds could bring more users into the Ethereum network, especially since fund managers may not be allowed to stake the ETH they hold, prompting new investors to stake their own ETH for earnings.
This approval also brings clarity to Ethereum’s regulatory status. Jake Chervinsky, General Counsel at Variant, emphasizes that if these funds are allowed to trade, it may mean that un-staked ETH is not considered a security by the SEC, which could encourage more institutions to enter the market, overcoming their previous hesitations due to regulatory uncertainties.
The launch of the ETH ETF could have far-reaching effects on the Ethereum ecosystem. The potential buying pressure from these funds will benefit Ethereum and Layer 2 solutions. Ethereum’s token burning mechanism, which burns tokens in each transaction, may see a new deflationary trend if trading volume increases due to ETF-driven market dynamics.
The impact of the staking economy is another key area to watch. As platforms like Lido make it easier for individuals to stake ETH, the potential removal of more ETH from circulation due to the ETF could exacerbate concerns about the centralization of staked ETH.
The approval of the ETH ETF is equivalent to the recognition of Ethereum and could solidify its leadership position. Michael Anderson suggests that even a small fraction of institutional funds flowing into Bitcoin ETFs could consolidate Ethereum’s market share and valuation.
This development could also create opportunities for other blockchains such as Cardano, Solana, and Ripple. However, these blockchains face additional regulatory barriers. While Ethereum’s status remains unclear to the SEC, assets like Solana’s SOL and Cardano’s ADA are clearly classified as securities, complicating their path to ETF approval.
Financial institutions such as CME play a crucial role in the adoption of Bitcoin and Ethereum futures. Other cryptocurrencies would need similar support from financial institutions to achieve similar adoption, and this prospect is currently uncertain.
ETF
ETH
SEC
