This year has been a good one for cryptocurrencies. The U.S. Securities and Exchange Commission (SEC) first greenlit Bitcoin ETFs, and a few months later did the same with Ethereum ETFs.
These two crypto ETFs help bridge the gap between cryptocurrencies and traditional finance. The regulatory approval affirms these cryptos as legitimate investment instruments. It’ll also help integrate the two largest cryptos into the existing financial system, helping investors diversify their portfolios.
Given the SEC’s positive inclination towards cryptos, can we see more cryptocurrencies attempt to bring their own ETFs to market?
Ethereum is different
Vivien Lin, chief product officer at BingX, says the approval of a Bitcoin ETF should be considered separately from the Ethereum ETF. She reasons it’s because Ethereum was previously under investigation to determine whether it should be classified as a security or a commodity.
“It’s important to note that now ETH tokens are not considered ‘securities’ in the traditional sense, like stocks or bonds,” says Lin.
She explains the approval process for Bitcoin’s ETF was relatively straightforward as it was deemed a non-security. “However, since the SEC also declared Ethereum a non-security, it opens the door for other projects with similar complex structures to be eligible for ETF status,” says Lin.
Line your ducks
Aleksander Grandwilewski, head of education, Decentralized Masters, is certain cryptos will start lining up to pursue ETF approvals.
“Previously, the most coveted exposure for a coin was a listing on major exchanges like Binance or Coinbase,” says Grandwilewski. “Now, having an ETF provides even greater visibility and legitimacy.”
He believes any project would want the increased exposure and implied legitimacy that comes with having an ETF. Grandwilewski expects this trend to accelerate as more assets seek to capitalize on the benefits of being part of the traditional financial system through ETF offerings.
Terence Kwok, founder & CEO, Humanity Protocol, is also fairly certain we’ll see more crypto ETFs in the coming years. “The BTC ETF would’ve been unprecedented just a few years ago — but we’ve seen it this year,” says Kwok. “The same applies to Ethereum ETFs.”
The anticipated success of Ethereum ETFs tells Bundeep Singh Rangar, CEO, Fineqia International Inc., that other digital assets will soon follow suit.
“Digital assets like Cardano (ADA), Solana (SOL), Toncoin (TON) and Polkadot (DOT), which have strong communities and unique technological propositions, could be next in line,” says Rangar. That’s because he believes they offer specific advantages.
Their features like lower transaction fees, faster processing times, or enhanced security features, make them attractive candidates for spot ETFs, reasons Rangar.
Read: 7 best cryptocurrency wallets in UAE 2024
David Ben Kay, president, chief legal officer, corporate lawyer, Function X, Pundi X, agrees. He argues that if the existing crypto ETFs do well, investors could demand more exposure to specific cryptocurrencies.
“But the greatest hurdle to an increase in crypto ETFs remains a regulatory one,” cautions Kay. “If regulators become more accepting of crypto ETFs, we might see more offerings.”
Not as straightforward
Justin Newton, CEO at Netki Inc, believes it will be more difficult for other digital assets to get their own ETFs, at least for a while.
“Keep in mind that Bitcoin has been around since 2008-2009 and ETH since 2015 and they are just getting their ETFs today,” says Newton. He reasons other cryptos need time to mature enough for the SEC to approve them as ETF-ready assets.
Chanchal Samadder, head of product, ETC Group, also doesn’t expect more ETF approvals in the near future. He says one of the key criteria required for approval of an ETF is an existing futures contract on a regulated exchange. Today this exists for only Bitcoin and Ethereum.
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