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Highlights
- Clayton predicts inevitable trading of Ethereum ETFs following SEC approval.
- SEC's ambiguity on Ethereum’s status contrasts clear Bitcoin commodity classification.
- Potential July/August start for Ethereum ETF trading, pending S-1 approvals.
Former U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton recently discussed the inevitability and challenges associated with the trading of spot Ethereum exchange-traded funds (ETFs).
In recent approvals by the SEC, Clayton also explains what comes next and the issues that remain undecided in order for these funds to start trading.
Insights on Trading Spot Ethereum ETF
On Friday, in an interview on CNBC, the former SEC Chairman Jay Clayton discussed the process and consequences of the recently launched spot Ethereum ETFs. Clayton noted that the recent approval of the listing of these ETFs is a positive sign towards their trading. Nevertheless, he explained that the listing approval is different from the approval of the product, which is yet to be approved.
‘The listing approval is just the first step,’ Clayton said. The next and more significant phase is when the funds’ registration statements are approved, disclosing information on the purpose of the funds, the risks involved, and the funds’ management to the prospective investors.
In addition, Clayton was asked about the procedural approach to the Bitcoin ETFs and the official stated that similar issues has been discussed before. Speaking about the possibility of approval for Ethereum ETFs, he said, “We went through this same process with the Bitcoin product,” meaning that there is a high probability of approval for the same. However, as Clayton noted, there remain several questions about the classification of Ethereum under the law and the details of the ETF products.
Regulatory Challenges and Market Developments
Although the recent approvals indicate that Wall Street may be opening up to cryptocurrencies, there are significant regulatory differences between Ethereum and Bitcoin, especially in how various American regulatory authorities categorize them. While the status of Bitcoin is rather clear and it is considered as a commodity, the classification of Ethereum is still more questionable.
“The SEC has not definitively said up to now, and they still have not definitively said, that underlying transactions in Ethereum are not securities transactions,” Clayton explained. This ongoing uncertainty also plays a significant part in the regulatory stance toward Ethereum ETFs.
Clayton also pointed out the developments of the spot markets for cryptocurrencies. He pointed out that Bitcoin and Ethereum spot markets have “progressed tremendously over time”, adding that the trading volumes hit record highs; March 2024 ranked third in trading volumes. This growth in market maturity is important for the approval process because it speaks to one of Clayton’s concerns at the SEC, namely market efficacy.
Implications for Investors and the Crypto Market
The recent approval of eight applications for spot Ethereum ETFs by the SEC has been viewed as a positive development by some key industry stakeholders. As stated by Coinbase’s Chief Legal Officer Paul Grewal this decision supports Ethereum’s status of a commodity which has been believed among the crypto enthusiasts for a long time.
“This approval is significant as it signals a shift towards acknowledging Ethereum as a commodity,” Grewal said. This recognition is important because it determines the legal status of Ethereum and its acceptance by institutional investors.
Similarly, Bloomberg ETF analyst James Seyffart opines that the trading in these ETFs may begin in July or August, way before November. This timeline, however, is based on the assumption that the S-1 documents of the funds will be approved and these documents provide information on the basic structure of the fund and the strategy of its functioning.
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