Craig Salm, Grayscale’s Chief Legal Officer (CLO), recently shared his thoughts on the continuing debate around spot Ethereum Exchange-Traded Funds (ETFs) and the role of the US Securities and Exchange Commission (SEC) in the approval process. Despite prevalent uncertainties, Salm is sure that the Ethereum ETFs will be approved.
Salm highlighted the in-depth discussions between Grayscale and the SEC that preceded the approval of Bitcoin ETFs. These talks deliberated on how ETFs would handle the creation and redemption of shares, whether transactions would involve cash or other assets (in-kind), and the roles of key participants.
He went on to add that the processes and challenges associated with launching an Ethereum ETF are very similar to those encountered with Bitcoin ETFs. The primary distinction lies in the underlying asset of the ETF, with Ethereum ETFs focusing on Ether and Bitcoin ETFs on Bitcoin.
The Grayscale CLO asserted that the SEC’s prior engagement on these matters suggests a foundational groundwork that could ease the Ethereum ETF approval process. Salm acknowledged that his opinion might change as the decision date in late May 2024 approaches. However, he cautioned against interpreting the current lack of apparent regulatory engagement as a sign of any particular outcome.
Salm bolstered his argument by referencing insights from key industry leaders Paul Grewal and Brian Quintenz. He pointed out several critical factors supporting the approval of Ethereum ETFs. Firstly, he noted the need for “consistency with ETH futures ETFs,” emphasizing the importance of aligning the regulatory approach for both futures and spot ETFs.
Secondly, he mentioned the “regulation of ETH futures as commodity futures,” distinguishing them from security futures, to argue for a similar regulatory treatment of Ethereum ETFs. Lastly, Salm highlighted the “high correlation between futures and spot” prices, suggesting that this connection further justifies the approval of Ethereum ETFs based on existing precedents with other financial products.
In his concluding remarks, Salm reiterated Grayscale’s commitment to the approval of Ethereum ETFs, stating that their case is “just as strong as it was for spot #Bitcoin ETFs.” He looks forward to “engaging with the Commission on these important products,” underlining the importance of regulated access to Ethereum for investors through ETFs.
The comments come at a time when the Bitcoin ETFs are witnessing a shift to positive net inflows, amounting to $15.4M on Mar 25, 2024, after a week of outflows. The Fidelity Wise Origin Bitcoin Fund recorded the highest single-day net inflow at $261.8M, whereas the Grayscale Bitcoin Trust faced a substantial net outflow of $350.1M.
