Industry’s Optimism About Ether ETFs May Not Be as Beneficial as Experts Suggest
The approval of spot Ethereum ETFs by the SEC has caused mixed reactions in the cryptocurrency ecosystem. While it provides some clarity on Ether’s non-security status, experts believe there may be unintended consequences.
After months of deliberation, the SEC has accepted spot Ether (ETH) ETFs. However, this approval is currently limited to the 19b-4 filings, and actual trading authorization may take months as issuers’ S-1 applications are still under review.
According to Bloomberg’s James Seyffart, the process of obtaining actual trading authorization could extend over several months.
While the industry celebrates this progressive move, three experts have raised concerns about the implications of spot Ether funds.
One fundamental difference between ETFs based on BTC and ETH lies in the consensus mechanisms employed by both blockchains. Bitcoin uses a proof-of-work model, incentivizing participants to hold BTC. Ethereum, on the other hand, powered a multi-billion dollar decentralized finance (defi) landscape even before transitioning to a proof-of-stake design.
Carlos Mercado, a data scientist at Flipside Crypto, argues that holding ETH idly in ETFs goes against the asset’s purpose. He compares it to hoarding barrels of gasoline, stating that it’s not the best use of the asset.
Staking could have addressed this concern, but the SEC has withdrawn staking language from several updated spot Ethereum ETF filings. The SEC’s crackdown on staking service providers like Coinbase further fuels speculation about U.S. crypto staking adoption.
Tom McClean, a quantitative developer at Vega Protocol, believes that removing staking features may ease concerns about centralization but fails to fully address the issue. He argues that ETFs that only buy, hold, and sell Ether tokens introduce the risk of large amounts of ETH remaining unstaked and unproductive.
On the other hand, McClean sees this outcome as an opportunity to push for regulatory clarity on staking. Justin d’Anethan, Head of Business Development (APAC) at Keyrock, shares similar sentiments and believes that approved filings endorse Ether as a non-security. He suggests that this could alleviate concerns for investors and Ethereum stakeholders.
While the arguments and approved filings suggest a shift in the SEC’s view on ETH’s financial instrument status, it remains uncertain how the Wall Street regulator truly perceives the asset.
