If you have any interest in cryptocurrency trading, you likely know that the SEC (Securities and Exchange Commission) is close to approving an Ethereum ETF.
Cryptocurrency investors may soon have the chance to buy into new exchange-listed products, pending the regulator’s final confirmation.
The long-standing opposition from the US financial regulator and its Chair, Gary Gensler, to the second-largest cryptocurrency by market cap having a dedicated ETF on US exchanges has largely been overcome, not without political pressure.
This development coincides with the passing of a key cryptocurrency-related bill by the U.S. House of Representatives, called FIT 21, on Wednesday.
The approval of the Ethereum ETF could spark a broader cryptocurrency market rally.
However, the Financial Innovation and Technology in the 21st Century Act still requires Senate approval to become law.
The approval of the Ethereum ETF marks a significant regulatory shift. Until recently, the market did not anticipate an immediate approval of this product, a sentiment changed by a couple of tweets, notably from Bloomberg’s Senior ETF Analyst Eric Balchunas.
Ethereum’s abrupt 20% rally caught the market off guard, leading to a sharp increase late Monday. After stabilizing, another impactful tweet on Thursday morning highlighted new developments.
A bipartisan group of House lawmakers, including Majority Whip Tom Emmer and NJ Democrat Josh Gottheimer, sent a letter to SEC Chair Gary Gensler urging the approval of spot Ether ETFs and other digital asset ETFs.
Lawmakers see the approval of spot Bitcoin ETPs (exchange-traded products) as a significant milestone for both digital assets and financial markets.
They argue these products offer a safe, regulated investment vehicle for cryptocurrency exposure and reflect the SEC’s commitment to investor protection and financial market modernization.
The letter emphasizes that ETP transparency and reporting requirements will help mitigate market manipulation and illicit activities.
Gensler is urged to apply the same principles used in approving Bitcoin ETPs when considering Ethereum ETP applications, highlighting similar legal considerations for both.
With the U.S. election approaching and broad congressional support for new crypto legislation, the next growth phase for the industry could be months away.
Despite significant market liquidity shocks, cryptocurrencies have become legitimate investment vehicles, overcoming SEC Chair Gensler’s vocal opposition.
On Wednesday, House Democrats and Republicans passed a new bill, defining which cryptocurrencies are securities under SEC regulation.
Functional, decentralized blockchains fall under CFTC oversight, while centralized networks are designated as securities under stricter SEC regulation.
Despite SEC Chair Gensler’s opposition, citing regulatory gaps, FIT 21 passed with votes from 71 Democrats and 208 Republicans.
Gensler argued investor issues stem from noncompliance with existing rules, not regulatory ambiguity.
However, political pressure led the SEC to drop its opposition to the Ethereum ETF approval.
Gensler worries FIT 21 allows issuers to self-certify decentralization, potentially operating under lighter CFTC regulation.
Representative French Hill defended the bill, asserting it does not create loopholes but provides clarity.
House Financial Services Chair Patrick McHenry emphasized that FIT 21 resolves regulatory confusion between the SEC and CFTC, offering clear rules and strong guardrails for digital asset engagement.
It remains to be seen how companies will prove blockchain decentralization, but with potential ETF approvals for more digital assets, the U.S. cryptocurrency regulatory framework is likely to continue developing.
This week’s events may mark the beginning of the end for Bitcoin and Ethereum’s market dominance since the first ETF approval rumors.
As smaller cryptocurrencies missed the unique rally of the two largest crypto chains, speculation about future ETF products related to more digital tokens could be imminent.