Experts: Spot Ether ETFs not the boon industry thinks

While
the
approval
of
spot
Ethereum
ETFs
by
the
SEC
may
provide
some
clarity
on
Ether’s
non-security
status,
experts
believe
it
could
bring
out
unwated
ramifications
for
the
ecosystem.

After
months
of
deliberation
and
delayed
decisions,
the
U.S.
Securities
and
Exchange
Commission
(SEC)
has
accepted
spot
Ether
(ETH)
ETFs.
However,
this
approval
is
currently
limited
to
the
19b-4
filings,
with
actual
trading
authorzation
potentially
taking
months
as
issuers’
S-1
applications
are
still
under
review.

Bloomberg’s
James
Seyffart

noted
that
actual
trading
authorization
could
extend
over
several
months. 

As
the
industry
hailed
the
so-called
progressive
move,
especially
after
similar
approval
of
spot
Bitcoin
(BTC)
ETFs,
three
experts
told
crypto.news
that
spot
Ether
funds
could
mean
more
than
some
imagine. 

Centralization
and
Ether
dormancy

A
fundamental
difference
between
ETFs
underpinned
by
BTC
and
ETH
lies
in
the
individual
consensus
mechanisms
employed
by
both
blockchains.
Bitcoin
employs
a
proof-of-work
model,
where
miners
solve
complex
mathematical
equations
for
block
rewards.

Coupled
with
a
general
absence
of
smart
contract
functionality
and
a
defi
ecosystem,
the
simple
design
incentivizes
participants
to
send
and
hold
BTC.

Ethereum
is
different.
Even
before
the
network
transitioned
to
a
proof-of-stake
design,
ETH
powered
a
multi-billion
dollar
defi
landscape
and
was
built
for
on-chain
deployment. 

Flipside
Crypto
data
scientist
Carlos
Mercado
said
the
inability
to
use
ETH
domiciled
in
the
funds
seems
counterproductive
to
the
asset’s
merits.
“Holding
ETH
idly
is
like
hoarding
barrels
of
gasoline—it’s
not
the
best
use
of
the
asset,”
Mercado
explained.

Staking
may
have
addressed
this
concern,
but
all
staking
language
was

withdrawn
from
several
updated
spot
Ethereum
ETF
bids.
The
SEC
also
cracked
down
on
staking
service
providers
like

Coinbase,
adding
further
speculation
around
U.S.
crypto
staking
adoption.

According
to
Vega
Protocol
quantitative
developer
Tom
McClean,
axing
staking
features
eased
questions
of
centralization,
but
it
failed
to
address
the
problem
fully.
Instead
of
issuers
potentially
allocating
ETH
to
a
single
validator
or
a
select
group,
the
ETFs
look
likely
to
only
buy,
hold,
and
sell
Ether
tokens. 

This
will
“introduce
the
risk
of
large
amounts
of 
ETH
remaining
both
unstaked
and
unproductive
in
the
system
in
general,
as
it
will
also
not
be
used
on
gas
etc”, 
per
McClean. 

Regulatory
clarity

On
the
flip
side,
McClean
believes
the
outcome
could
push
investors
and
issuers
alike
to
seek
regulatory
clarity
on
staking.
Keyrock’s
head
of
business
development
(APAC),
Justin
d’Anethan
echoed
similar
thoughts
and
opined
that
approved
filings
seemingly
endorsed
Ether
as
a
non-security. 

The
crypto
exec
noted
that
applications
weren’t
filed
in
the
same
manner
as
securities-linked
ETFs.
“A
gambling
man
might
see
this
as
a
clear
sign
that
regulators
will
not
deem
Ether
a
securities.
This
would
lift
a
weight
off
of
the
shoulders
of
many
investors
and
Ethereum
stakeholders.” 

Although
the
arguments
and

approved
filings
suggest
a
180
turn
from
the
SEC
on
ETH’s
financial
instrument
status,
it’s
still
unclear
how
the
Wall
Street
regulator
views
the
asset.