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Ethereum ETF Approval Will Open Doors to More Crypto ETFs — TradingView News
If you have any semblance of interest in cryptocurrency trading, you should have already heard that the SEC (Securities and Exchange Commission) approval of the Ethereum ETF is well underway. Cryptocurrency investors are about to have the opportunity to purchase some brand new exchange-listed products in the coming days or weeks, pending final confirmation from the regulator.
Long-standing opposition from the top US financial regulator and its chairman Gary Gensler to the second-largest cryptocurrency by market capitalization receiving a dedicated ETF listed on US stock exchanges has been largely overcome, and not without political pressure .
Coinciding with the passage of a key cryptocurrency-related bill by the US House of Representatives, called FIT 21 on Wednesday, the approval of the Ethereum ETF could set the stage for a broader cryptocurrency market rally . That said, the Financial Innovation and Technology in the 21st Century Act still needs Senate approval to be signed into law.
Political pressure for the approval of the Ethereum ETF
The Ethereum ETF approval represented a stark shift in regulatory sentiment – until this week the market had not expected a product approval in the immediate future, and that literally changed with a couple of tweets. The first one was probably sent by Bloomberg senior ETF analyst Eric Balchunas.
Update: @JSeyff and I’m increasing our Ether ETF spot approval odds to 75% (up from 25%), hearing rumors this afternoon that the SEC might do a 180 on this (increasingly political issue), so now everyone hurry (as we assumed everyone else would be denied). See… https://t.co/gcxgYHz3om
Ethereum’s resulting roughly 20% rally was sudden and caught some of the market by surprise, exacerbating the move to a very sharp rally late on Monday. Having consolidated itself in a newly established sphere following the news, another bombshell tweet from the same author on Thursday morning highlighted a new development.
A bipartisan group of House lawmakers, including Majority Whip Tom Emmer and New Jersey Democrat Josh Gottheimer, sent a letter to SEC Chairman Gary Gensler urging the approval of not only Ether spot ETFs but also other ETFs on digital assets.
A bipartisan group of House lawmakers (including Majority Whip Tom Emmer and New Jersey Democrat Josh Gottheimer) sent Gary Gensler a letter urging the SEC to approve spot ETFs on Ether (and “other” digital assets) because it offers investors access to cryptocurrencies in a regulated and transparent vault. format pic.twitter.com/YLSJh6n0lF
Lawmakers view the approval of Bitcoin spot ETPs (exchange-traded products) as a significant milestone for both digital assets and financial markets. They believe these products provide a safe, regulated investment vehicle for cryptocurrency exposure and reflect the SEC’s commitment to investor protection and the modernization of financial markets.
The letter highlights that ETP transparency and reporting requirements will help mitigate market manipulation and other illicit activities. SEC Chairman Gensler is urged to apply the same principles used in approving Bitcoin ETPs when he reviews applications for Ethereum ETPs and emphasizes that the legal considerations for both are similar.
With the upcoming US elections and a largely supportive Congress regarding new cryptocurrency legislation, the next phase of growth for the industry could be just months away. Despite significant liquidity shocks in the market, cryptocurrencies have been legitimized as an accessible investment vehicle, despite strong opposition from SEC Chairman Gensler.
Explanation of the law on financial and technological innovation
On Wednesday, House Democrats and Republicans banded together and passed a new piece of legislation that aims to outline more specific definitions on which cryptocurrencies are considered securities and will fall under the SEC’s regulatory umbrella.
If the blockchain used in a cryptocurrency is functional and decentralized, it will fall under the oversight of the CFTC. As for centralized blockchain networks, these will be designated as securities and will fall under the stricter regulatory oversight of the SEC.
Despite opposition from SEC Chairman Gary Gensler, who argued that there are regulatory gaps in the proposed framework, FIT 21 passed with the votes of 71 Democrats and 208 Republicans.
Gensler stressed that the problems for investors continue to be broad and caused primarily by failure to comply with existing rules, rather than regulatory ambiguity. However, the regulatory body withdrew its opposition to the approval of an Ethereum ETF after political pressure.
The SEC Chairman expressed his concerns that FIT 21 allows issuers to self-certify decentralization, thus escaping SEC oversight and potentially operating under lighter CFTC regulation.
The Vice Chairman of the House Financial Services Committee and Chairman of the new subcommittee charged with overseeing all areas related to digital assets and financial technology, Representative French Hill, (R) AR defended the bill, saying it does not create loopholes nor deregulates cryptocurrencies but provides clarity.
Chamber Financial Services Chairman Patrick McHenry pointed out that FIT 21 resolves the regulatory confusion between the SEC and CFTC by offering clear rules and strong barriers to engaging digital assets.
ETFs beyond Bitcoin and Ethereum
It remains to be seen how a company can demonstrate that the blockchain it uses is decentralized, but with potential ETF approvals for more digital assets, the cryptocurrency regulatory framework in the United States is likely to continue its development in the coming quarters.
The events that transpired this week may just be the beginning of the end of Bitcoin and Ethereum’s heavy dominance of the cryptocurrency market that has crept in since the first rumors of ETF approvals circulated.
With most smaller cryptocurrencies failing to capture the unique rally of the two largest cryptocurrency chains, speculation on the future of future ETF products related to multiple digital tokens could begin just around the corner.