SEC Approves Grayscale and ProShares Applications for Ethereum ETFs

SEC has approved applications for a mini Ethereum-based ETF from Grayscale and a spot exchange-traded fund from ProShares.

The U.S. SEC has approved Grayscale’s mini Ethereum ETF, which will be seeded with assets currently backing the larger ETF. ProShares’ Ethereum ETF was also approved. The fund is likely to start trading next week along with other spot ETH ETF products. Grayscale also has a mini…

— Wu Blockchain (@WuBlockchain) July 18, 2024

The first instrument is based on assets supporting a larger ETF. It is expected to complement the rest of the Ethereum-based lineup and support a broad range of investors.

ProShares has yet to specify the fee; in the Grayscale Ether Mini Trust, it will be 0.25%, while the senior counterpart will charge 2.5%.

James Seyffart of Bloomberg explained the company’s interest in registering a mini-fund as a way to mitigate the potential outflow from the ETHE. This could occur as a result of transforming the larger structure.

I think this means that the mini Ethereum ETF is going to launch at the same time as all the others. $ETH will seed with 10% of $ETHE‘s assets essentially off the bat. Should help alleviate some of the likely Grayscale outflows. Still don’t know fees on either though. https://t.co/kmHoHUS4em

— James Seyffart (@JSeyff) July 17, 2024

When Will Trading Begin?

The expert predicted that Grayscale Ether Mini Trust and ProShares Ether ETF will start trading alongside other products next week. 

Sources from Decrypt and CoinDesk cited July 23 as a target date. Bloomberg analyst Eric Balchunas shares this view, barring unforeseen circumstances.

Update: Nate’s instincts were right, hearing SEC finally gotten back to issuers today, asking them to return FINAL S-1s on Wed (incl fees) and then request effectiveness on Monday after close for a TUESDAY 7/23 LAUNCH. This is provided no unforeseeable last min issues of course! https://t.co/D21FD9Qf94

— Eric Balchunas (@EricBalchunas) July 15, 2024

On May 23, the Commission approved 19b-4 forms from ETH-ETF issuers. Currently, the regulator is reviewing S-1 form proposals.

In May, Grayscale Investments withdrew its application for an Ethereum futures ETF. 

CEO Michael Sonnenshein promised that the company would focus its efforts on converting ETHE into a spot exchange-traded fund. At the time, the top executive expressed confidence that the regulator would transform the Ethereum trust into an instrument.

Competitors’ Actions

ETH-ETF issuers specified fee sizes in updated applications by the SEC deadline, reports The Block.

Seven out of ten funds use fee discounts tied to a timeline or AUM. Additionally, seven sponsors have chosen Coinbase as their custodian.

Specifically, BlackRock set a fee of 0.25%. For one year or until assets under management reach $2.5 billion, the rate will be 0.12%.

For 21Shares, these parameters are 0.21% and 0% until one of two conditions is met — six months after trading begins or AUM exceeds $500 million.

Bitwise has similar conditions, except for a base rate of 0.2%.

Fees for Invesco Galaxy, VanEck, and Franklin Templeton are 0.25%, 0.2%, and 0.19%, respectively. Fidelity’s rate is 0.25%. The fee will not be charged until the end of 2024.

Franklin Templeton will waive the fee until January 31, 2025, on the first $10 billion, while VanEck will do so for a year until assets reach $1.5 billion.

Staking?

None of the mentioned applications include staking. Hester Peirce from the SEC assured that “any feature of the products is always open for reconsideration.”

According to Balchunas, both staking and the option for in-kind redemption, which are currently not included in the proposals, could become a reality if there is a change in the U.S. presidency.

Hester Peirce saying what we thought but nice to hear it directly: both staking and in-kind creation/redemption for eth/btc ETFs are “open for reconsideration” (if there’s a change at POTUS obv). https://t.co/sqAmL878LE

— Eric Balchunas (@EricBalchunas) July 17, 2024

Variant’s chief legal officer Jake Chervinsky stated that such innovations are a matter of time, not possibility.

“There are no compelling reasons for the SEC to prevent staking in an ETH-ETF. It is not a security. Investors are fully capable of understanding the risk of such an instrument and deciding for themselves if they are willing to take it,” the expert explained.

In Steno Research, a net inflow of $15-20 billion into future funds within a year and Ethereum’s rise to $6500 were forecasted.

K33 Research estimated inflows into products in the first five months after trading begins at $3.1–4.8 billion. 

Earlier, QCP Capital predicted Ethereum’s rise to $4800 following the approval of ETH-ETF. Experts believe that demand amounting to 10-20% of inflows into bitcoin funds will trigger positive movement.