After the approval for spot Bitcoin ETFs on January 10, 2024, the Securities and Exchange Commission (SEC) has approved a rule change that allows exchanges to list spot Ethereum ETFs in the U.S. on May 23, 2024.

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Nevertheless, the rule change will not lead to an immediate listing of Ethereum ETFs, since every single product needs its own approval from the SEC.

This approval means that the U.S. is catching up with the European crypto ecosystem where Bitcoin, Ethereum, and other cryptocurrencies are available to all kind of investors via structured notes, so-called exchange traded notes (ETN). Obviously, there are some legal differences between an ETN and an ETF, but given the fact that many investors in Europe are already using ETNs, any kind of spot Bitcoin or Ethereum ETF would, from my perspective, not be a big game changer in Europe.

It was a bit of a surprise that it took the SEC more than four months to approve spot Ethereum ETFs, after they had already approved spot Bitcoin ETFs. One of the main reasons for this seemed to be different views on the so-called staking, since the promoters changed the wording of their ETF application to exclude any staking activities. Staking is a feature of the Ethereum ecosystem were owners of Ethereum can earn rewards for actions that help the network reach consensus.

With the decision to allow the listing of Ethereum ETFs the SEC has widened the investment opportunities for U.S. investors—they will be able to invest in regulated spot Ethereum ETFs quite soon. The approval of spot Ethereum ETFs might also be a signal for other regulators currently in the decision-making process for the approval of spot cryptocurrency products. As for this, it might be interesting to see how EU legislators will react, as ESMA has started a consultation on the eligible assets directive (EAD) which is part of the UCITS framework. That said, even if cryptocurrencies become eligible assets for UCITS products, the approval of a spot Bitcoin or Ethereum ETF in the EU would also require a change in the rules for the diversification of UCITS products.

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