The cryptocurrency landscape in the U.S. is changing once more, as the Securities and Exchange Commission (SEC) recently approved spot Ethereum (Ether) ETFs. This article will discuss the implications of this approval on the cryptocurrency landscape and how the growing interest in crypto assets is changing investor sentiment.
SEC approves spot Ethereum ETFs
After much anticipation, the SEC has approved the eventual launch of ETFs that invest in the cryptocurrency Ether. In a filing on Thursday, May 23rd, the agency said that after careful review; it approved applications by Cboe, Nasdaq, and the New York Stock Exchange to list spot Ethereum ETFs, noting the proposals by the exchanges were found to be consistent with the Securities Exchange Act.
Despite the approval of spot Bitcoin ETFs in January 2024, many observers believed that the approval of spot Ether ETFs would be drawn out; as such, their expedited approval was welcomed news. In speaking about spot Ether ETFs approval to Reuters, Rob Marrocco, global head of ETP listings at Cboe Global Markets said, “The introduction of spot bitcoin ETFs has already demonstrated significant benefits for the digital assets and ETF space, and we believe that spot ether ETFs will similarly provide safeguards for U.S. investors.” For U.S. ETF issuers like VanEck and BlackRock (NYSE:BLK), the approval of spot Ether ETFs is encouraging news, given their intention to launch investment solutions tied to the second-largest cryptocurrency.
In other regulatory news about cryptocurrencies, the U.S. House of Representatives passed a bill, Financial Innovation and Technology for the 21st Century Act, on Wednesday, May 22nd. The bill aims to create a new legal framework for digital currencies. In the U.K., the Britain Financial Conduct Authority recently approved the “cETNs” - cryptoasset-backed exchange traded notes - for professional investors, paving the way for exchange-traded products (ETPs) backed by cryptocurrencies on the London Stock Exchange.
Growing acceptance of Crypto Assets in Canada
Though crypto-back investment solutions have been available to the Canadian investor populace for quite some time, their popularity has waxed and waned in recent years due to the turbulence of the crypto assets industry. However, a recent report from KPMG Canada entitled, With rising cryptoasset adoption in Canada, there’s reason for optimism” suggests a changing sentiment about the asset class.
A recent survey conducted by KPMG’s Digital Assets Centre of Excellence (CoE) and the Canadian Association of Alternative Strategies & Assets (CAASA) gathered responses from institutional investors and financial services organizations on their perspectives and practices related to cryptoassets. The collective feedback from respondents highlighted that the strengthening regulatory environment and increased market surveillance have made the crypto space far more investable from an institutional point of view.
The strengthening of the infrastructure ecosystem that supports crypto assets, namely, custody infrastructure, crypto financial services, and trading/brokerage services, is vastly better now than it was in years prior, thus fostering greater confidence in the industry.
As summarized and stated in the report, looking ahead to 2024, KPMG expects to see a continuation of institutional adoption of crypto assets. Driven by client demand, this will likely push financial services providers to improve their existing crypto asset offerings and encourage other sidelined organizations to become more active.
Investing in Ethereum ETFs
For Canadian investors who desire to gain exposure to Ethereum ETFs, there are several options available to them:
Evolve Ether ETF (TSX:ETHR) (Ticker: ETHR/ETHR.U)
ETHR’s investment objective is to expose investors to the daily price movements of the U.S. dollar price of Ether while experiencing minimal tracking error by utilising the benefits of the creation and redemption processes offered by the exchange-traded fund structure. ETHR offers investors exposure to Ether by investing directly in Ether, with ETHR’s holdings of Ether-priced based on the CME CF Ether-Dollar Reference Rate (”ETHUSD_RR”), a once-a-day benchmark index price for Ether denominated in U.S. dollars and administered by benchmark administrator, CF Benchmarks Ltd.
CI Galaxy Ethereum ETF (TSX:ETHXu) (Ticker: ETHX.U/ETHX.B)
ETHX’s investment objective is to provide unitholders with exposure to Ether through an institutional-quality fund platform. To achieve its investment objective, the fund invests directly in Ether and will utilize high-quality service providers in the digital assets sector (e.g., digital asset custodians, trading platforms, and trading counterparties) in order to manage the assets of the Fund.
The fund’s portfolio will be priced based on the Bloomberg Galaxy Ethereum Index (ETH Index), and its net asset value will be calculated using this index.
Purpose Ether ETF (TSX:ETHH) (Ticker: ETHH/ETHH.B/ETHH.U)
ETHH seeks to buy and hold substantially all of its assets in the digital currency Ether and provide holders of ETF units with the opportunity for long-term capital appreciation. To achieve its investment objective, the fund invests in and holds substantially all of its assets in Ether to provide unitholders with a secure, convenient, lower-cost alternative to a direct investment in Ether.
The fund will not speculate with regard to short-term changes in Ether prices. The fund will not use derivatives instruments, the underlying interest of which is Ether, for non-hedging purposes. In respect of the ETF Carbon Offset Units, the fund will purchase carbon offset credits in order to aim to neutralize the carbon footprint related to the fund’s Ether allocable to this class.
This content was originally published by our partners at the Canadian ETF Marketplace.