Ethereum ETF Approval Paves the Way for Additional Cryptocurrency Investment Funds: TD Cowen

The recent authorization of Ethereum exchange-traded funds (ETFs) has paved the way for additional cryptocurrency investment products, as indicated by research from TD Cowen’s Washington Research Group.

Although the rapid approval surprised some, the research team regarded it as an expected development following the earlier approval of Bitcoin ETFs this year.

Jaret Seiberg, a member of TD Cowen’s team, remarked that the Ethereum ETF approval arrived approximately six months sooner than anticipated but was foreseeable after the Securities and Exchange Commission (SEC) approved crypto futures ETFs.

ETFs Featuring a Collection of Crypto Tokens May Follow

Seiberg further indicated that within the upcoming year, investment options that include a “collection of crypto tokens,” such as Bitcoin and Ether, and possibly more, could emerge.

Nonetheless, the approval of Ethereum ETFs does not signify a broader change in the SEC’s position on cryptocurrencies.

SEC Chair Gary Gensler, recognized for his critical viewpoint on the crypto sector, made a pointed statement concerning the passage of crypto legislation that could potentially reduce the agency’s authority.

Gensler emphasized the industry’s history of failures, frauds, and bankruptcies, attributing these issues not to a lack of regulations but to numerous participants in the crypto space ignoring the existing rules.

His statement was issued prior to the Financial Innovation and Technology for the 21st Century Act, or FIT 21, being passed in the U.S. House of Representatives.

While Gensler’s agency may encounter difficulties, TD Cowen anticipates that the SEC will retain its Democratic majority until 2026.

The research group expects the agency to persist in legal actions against crypto trading platforms that deal in tokens classified as unregistered securities by the SEC.

Spot Ether ETF Approval Confirms ETH is Not a Security

The recent approval of spot ETH ETFs may affirm Ether’s classification as a non-security, according to industry experts.

As reported, Bloomberg ETF analyst James Seyffart stated that the approval of these commodity-based trust shares suggests that the SEC explicitly acknowledges Ether as not being a security.

Seyffart further proposed that this acknowledgment could also apply to other tokens, reinforcing their designation as commodities.

Digital asset attorney Justin Browder echoed Seyffart’s perspective, asserting that if Ether ETFs receive S-1 approval, which is the final requirement for them to commence trading, it would definitively resolve the debate, confirming that ETH is indeed not a security.

This is a key point. The reason the approval of the spot ETH ETFs is a clear indication that the SEC does not consider ETH a security is because funds whose assets are 40% or more securities may not register through a Form S-1; rather, they are considered investment companies and… https://t.co/Q2MkMsrqNg

— TuongVy Le (@TuongvyLe12) May 23, 2024

Adam Cochran, a partner at venture capital firm Cinneamhain Ventures, expanded on this argument, suggesting that this reasoning could also apply to tokens from other projects.

On May 23, the SEC officially approved 19b-4 applications from VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise for the issuance of spot Ether ETFs.

Importantly, several ETF issuers excluded staking from their final amendments.

Seyffart anticipates that the S-1 approvals could be granted in a “couple of weeks,” although he acknowledges that the process may take longer, typically lasting up to five months.

However, fellow Bloomberg ETF analyst Eric Balchunas believes that a mid-June launch is certainly feasible.

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