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How approved Spot ETH ETF differ from BTC ETF approval process



How approved ETH ETF differ from BTC ETF approval process

The United States Security and Exchange Commission (SEC) has approved the long-awaited Ethereum (ETH) ETF has been given approved just a few months after Bitcoin ETFs received the same from the SEC. 

While this has brought good news to the crypto market, the approval is not similar to that of the Bitcoin Spot ETF earlier in the year. In the case of the Bitcoin spot ETF, the SEC commissioners voted on the approval, however, in the spot ETH ETF, the decision was delegated.

Cryptocurrency exchange-traded funds (crypto ETFs) are financial instruments that provide exposure to cryptocurrencies or related crypto assets without requiring investors to directly hold the underlying digital assets. 

While spot crypto ETFs hold actual cryptocurrencies like Bitcoin or Ethereum as part of their assets and aim to track the real-time price of the underlying cryptocurrency. On the other hand, crypto futures ETFs use futures contracts to gain exposure to the price movements of cryptocurrencies such as Bitcoin.

Approval of Bitcoin Spot ETF

In 2021, the SEC approved Bitcoin futures ETFs, with the largest being the ProShares Bitcoin Strategy ETF (BITO). Two years later, ETH Futures ETF was given a greenlight as well.

As more expectations grew in the industry to see a crypto Spot ETF approved, the SEC finally gave the green light to Bitcoin Spot ETF with the first 11 spot Bitcoin ETFs authorized on January 10, 2024. The SEC had previously rejected several applications for a spot Bitcoin ETF, citing concerns over market manipulation, fraud, custody, and investor protection.

Details from the approval process of the Bitcoin Spot ETF earlier this year revealed that the SEC commissioners voted on it. The vote included SEC Chair Gensler and Republican Commissioners Hester Peirce and Mark Uyeda in favor, while Democratic Commissioners Jaime Lizárraga and Carolina Crenshaw dissented.

The SEC is overseen by a five-member board of commissioners: Gary Gensler (Chair) – Term started in 2021, ends in 2026; Hester M. Peirce – Term started in 2018, ends in 2025; Caroline A. Crenshaw – Term started in 2020, ends in 2024; Jaime Lizárraga – Term started in 2022, ends in 2027; and Mark T. Uyeda – Term started in 2022, ends in 2028. Members are appointed by the President with the advice and consent of the United States Senate.

Regarding the approval of Spot ETH ETFs, the SEC entrusted the vote to the Securities and Exchange Commission’s (SEC) Trading and Markets Division, rather than to the SEC commissioners, including Chair Gary Gensler.

The SEC is organized into different divisions and offices. One of these is the Division of Trading and Markets, which oversees the regulation of significant participants in the securities markets like brokers, dealers, and securities exchanges.

This division has the power to make certain operational decisions autonomously from the commissioners. In this instance, the responsibility to approve the forms for spot Ethereum ETFs lay with this division.

While this may be looked at as strange, James Seyffart, a research analyst within Bloomberg Intelligence explained that making decisions through delegated authority is a standard practice in most organizations. This approach is commonplace because it streamlines processes, allowing the organization to operate more efficiently and effectively. 

The approval was issued via delegated authority which means there won’t be public commissioner votes to see. 

He added that if the SEC (Securities and Exchange Commission) had to hold an official vote for every decision or document, the process would be extraordinarily cumbersome and chaotic, described as “insane.” 

If SEC required an official vote for every decision or every document — it’d be insane. 

The approval of spot Ethereum ETFs is expected to drive a potential rally of up to 60% in the price of Ethereum in the coming months, as forecasted by QCP Capital. QCP Capital believes that this projection follows the behavior of Bitcoin when its Spot ETF was approved.

Bitcoin rose 66% from around $44,500 to a peak of $73,800 in the two months following the Security and Exchange Commission’s approval of spot Bitcoin ETFs on January 10. 

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