In a significant move that underscores the growing intersection of traditional finance and the cryptocurrency market, Grayscale Investments has officially applied for a new Ethereum futures ETF. This move could potentially open the doors for a wider array of investors to access the world’s second-largest cryptocurrency, Ethereum, through a regulated investment vehicle.
Grayscale’s New Approach to Ethereum Futures ETF Regulation
Grayscale, as reported by the Wall Street Journal on September 19, has formally filed for a new Ethereum futures exchange-traded fund (ETF). This latest filing has been made under the Securities Act of 1933, marking a departure from Grayscale’s earlier attempts at an Ethereum futures ETF, which were submitted under the Investment Company Act of 1940.
The Wall Street Journal pointed out that the U.S. Securities and Exchange Commission (SEC) has granted approval for several Bitcoin futures ETFs, utilizing both the 1933 and 1940 Acts. Meanwhile, spot Bitcoin ETFs, although numerous filings have been made, have not received approval and fall under the 1933 Act.
The SEC’s prior approval of certain Bitcoin futures ETFs, commencing around October 2021, along with the overall optimism surrounding cryptocurrency ETFs, has established a promising landscape for asset managers considering Ethereum futures ETFs.
As evidence of this trend’s momentum, numerous asset management companies have already entered the arena. In recent weeks, entities such as Volatility Shares, Bitwise, ProShares, VanEck, Roundhill, and Valkyrie Investments have all submitted applications for Ethereum futures ETFs. Additionally, Hashdex is identified by The Wall Street Journal as another applicant, bringing the total number of applicants to at least 12.
Grayscale currently in the process of seeking approval for an ETF
Grayscale’s efforts to secure an ETF, in any form, have garnered significant attention due to the company’s intention to transform its existing GBTC fund into a Bitcoin spot ETF. Although the SEC initially rejected Grayscale’s application in 2022, Grayscale achieved a partial legal victory in August, which is expected to compel the SEC to reevaluate the application.
As highlighted by the Wall Street Journal, judges in the D.C. Court of Appeals acknowledged that Grayscale’s proposed ETF conversion bears “material similarities” to previously approved Bitcoin futures ETFs, indicating a favourable inclination toward the company. However, it’s crucial to emphasize that this ruling does not obligate the SEC to grant approval for Grayscale’s proposed ETF. Instead, it necessitates a thorough review by the SEC.
Additionally, other companies are also in pursuit of Bitcoin spot ETFs, closely following the template set by a highly-publicized application submitted by BlackRock in June. Grayscale’s unique spot Bitcoin ETF application, distinct from BlackRock’s, is notable for its focus on an existing fund.
Grayscale’s pursuit of a Bitcoin spot ETF, along with its legal progress, highlights the firm’s commitment to expanding its cryptocurrency product lineup. However, it’s essential to emphasize that regulatory scrutiny will continue to play a pivotal role in shaping the future of crypto ETFs, underscoring the need for a comprehensive and compliant approach in this rapidly evolving financial landscape.
Grayscale’s application for a new Ethereum Futures ETF reflects the evolving landscape of cryptocurrency investments and their integration into traditional financial markets. The move signifies Grayscale’s determination to diversify its crypto investment offerings beyond Bitcoin and introduces a potential avenue for a broader range of investors to engage with Ethereum through a regulated ETF.
While regulatory hurdles remain, the SEC’s previous approval of Bitcoin futures ETFs and the growing interest in cryptocurrency ETFs suggest a promising environment for Ethereum futures ETFs. Numerous asset management firms have already seized the opportunity, with at least 12 applying for similar ETFs in recent weeks.