Bitcoin ETFs have boosted Bitcoin's price so far, with inflows of over $12 billion and its first-ever pre-halving all-time high.
Investors hope for similar gains for Ethereum with a spot ETF approval in the US, but these ETFs face regulatory hurdles.
The SEC's hesitation stems from Ethereum's Proof-of-Stake mechanism, which makes it difficult to classify as a security or commodity.
Industry leaders like Jan van Eck are pessimistic about ETF approval before the SEC's deadline in late May.
Ethereum ETF approval would increase exposure and price, but investors might need to wait longer.
Ethereum
The spot Bitcoin ETFs have done wonders for the cryptocurrency since their approval in early January.
Between the January 11th ETF approvals and the time of writing this article, these Bitcoin ETFs have been directly responsible for bringing in around $12.37 billion worth of inflows into Bitcoin
As a result, we just witnessed the first ever Bitcoin ATH before a halving in Bitcoin's 15-year history—along with an impressive 65% price increase on Bitcoin this year alone.
Investors are starting to expect the same thing for Ethereum, leading to calls for spot Ethereum ETFs in the US.
However, according to several industry leaders—and the SEC chairman himself—hoping for an Ethereum ETF anytime soon, might be a waste of time.
The cold, hard reality, at least, according to expert opinion, is that despite the eagerness of investors and the success of the 11 spot Bitcoin ETFs so far, the SEC remains hesitant to approve these products for Ethereum, and there are good reasons why.
As most people know, Ethereum currently sits as the second-largest crypto by market cap.
This makes it the strongest contender for the “next in line” status for a spot ETF.
As it stands, several major financial players have joined the waitlist including BlackRock, Fidelity, and VanEck among others.
However, the regulatory uncertainty has been steep, and enthusiasm is at an all-time low.
Investor enthusiasm tanked further after a recent CNBC interview with the VanEck CEO, Jan van Eck at the recent Paris Blockchain Week.
Van Eck expressed doubts about the SEC’s willingness to approve these Ethereum ETFs in the interview, and considering how the SEC’s review deadline looms for late May, he stated that the industry may be bracing itself for disappointment.
But why?
One of the core differences between Ethereum and Bitcoin is their consensus mechanisms.
While Bitcoin is a Proof of Work blockchain, Ethereum is a Proof of Stake chain. This means that the Ethereum network allows (or requires) validators to lock up (or stake) a significant portion of their coins to secure the network and earn rewards.
This “stake and earn” feature of Ethereum makes it hard to classify as either a commodity or a security, which is the SEC’s qualm.
Ethereum’s status as a Proof of Stake chain complicates the whole classification issue, making an ETF approval challenging.
The SEC Chair Gary Gensler, even refrained from making any statements on Ethereum’s classification, as he maintains a cautious stance.
It becomes even more complicated when we add that the Chairman of the CFTC (another financial watchdog), Rostin Behnam once recognized Ethereum as a commodity, and not a security, as the SEC fears.
"I don't want to prejudge any one filing, '' Gensler even told Yahoo Finance in March
Moreover, Jean-Marie Mognetti, the CEO of CoinShares also said something similar to CNBC a while ago, about EThereum's Proof of Stake status.
"I don’t see anything being approved this side of the year," he said.
While it is true that an approved Ethereum ETF would significantly widen Ethereum’s exposure and potential—not to mention its price, the waiting game appears poised to continue for a while longer.
Overall, the Ethereum community remains on the edge of their seats as the “day” approaches.
Will an Ethereum ETF be approved by May, or are we about to see some disappointment?
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.