The prospect of spot Ethereum (ETH) exchange-traded funds (ETFs) has become a topic of intense speculation and debate. Arthur Hayes, the co-founder of BitMEX, a prominent crypto derivatives exchange, recently shared his thoughts on the potential impact of ETH ETFs on the market, particularly in light of the success of spot Bitcoin (BTC) ETFs.

TLDR

  • BitMEX co-founder Arthur Hayes predicts that Ethereum will experience significant demand, especially if the SEC approves spot ETH ETFs.

  • Hayes believes that the success of Bitcoin ETFs will lead to the approval of ETFs for other crypto assets like Ethereum and Solana, as banks stand to benefit from the fees generated by these products.

  • Craig Salm, Grayscale’s Chief Legal Officer, suggests that the SEC’s perceived lack of engagement with spot Ethereum ETF applicants will not hinder the prospects of such products.

  • Salm argues that the issues resolved during the Bitcoin ETF approval process, such as creation and redemption processes, cash versus in-kind transactions, and custody concerns, are applicable to Ethereum ETFs due to the similarities between the two cryptocurrencies.

  • Despite growing skepticism and regulatory uncertainty surrounding Ethereum ETFs, Salm believes that investors deserve access to Ethereum in the form of a spot ETF, and the case for approval is just as strong as it was for spot Bitcoin ETFs.

In an interview with The Wolf of All Streets, Hayes expressed his belief that Ethereum will experience a significant surge in demand, especially if the U.S. Securities and Exchange Commission (SEC) approves applications for spot ETH ETFs.

He drew parallels to the recent approval and subsequent listing of spot Bitcoin ETFs, which have been among the most successful ETF launches in history, surpassing even the likes of the Invesco QQQ ETF and the SPDR S&P 500 ETF Trust (SPY).

Hayes argued that the success of Bitcoin ETFs has set a precedent for the approval of ETFs for other crypto assets, such as Ethereum and Solana. He pointed out that banks stand to benefit greatly from the fees generated by these products, making it unlikely that they would oppose their approval. “The banks run everything in every single major jurisdiction. And so if the banks want to make money on these things, they will have them,” Hayes stated.

Despite the optimism expressed by Hayes, there has been growing skepticism regarding the possibility of regulatory approval for Ethereum ETFs in recent weeks.

The SEC has postponed the approval process for several issuers, prompting concerns among market analysts. Additionally, reports suggest that the SEC is investigating Ethereum’s regulatory classification as either a security or a commodity, adding further uncertainty to the approval prospects.

However, Craig Salm, the Chief Legal Officer at Grayscale, a leading digital asset management firm, believes that the SEC’s perceived lack of engagement with spot Ethereum ETF applicants will not be a decisive factor hindering the prospects of such products.

In a recent post on X  Salm argued that the issues resolved during the Bitcoin ETF approval process, such as creation and redemption processes, cash versus in-kind transactions, and custody concerns, are directly applicable to Ethereum ETFs due to the similarities between the two cryptocurrencies.

1/ Recently, there’s been a lot of chatter about spot #Ethereum ETFs. I personally am not deterred by it and believe the ETFs should be approved. But right now I want to talk about how I think perceived “lack of SEC engagement” should be viewed at this point:

— Craig Salm (@CraigSalm) March 25, 2024

Salm emphasized that the SEC has already engaged with issuers during the application process for spot Bitcoin ETFs, and the solutions developed during that process can be readily applied to Ethereum. “All of these issues were figured out and are identical when comparing spot Bitcoin to Ethereum ETFs. The only difference is rather than the ETF holding bitcoin, it holds ether. So in many ways, the SEC already has engaged and issuers simply have less to engage on this time,” Salm explained.

Salm reiterated the arguments made by Paul Grewal, Coinbase’s chief legal officer, regarding the SEC’s need to approve a spot ETH ETF. He highlighted the consistent and robust correlation between ETH futures and spot prices, which reinforces the rationale for approval.

Despite the regulatory uncertainty and delays surrounding Ethereum ETFs, Salm remains confident that investors want and deserve access to Ethereum in the form of a spot ETF.

He believes that the case for approval is just as strong as it was for spot Bitcoin ETFs, and that the SEC’s engagement during the Bitcoin ETF approval process has paved the way for a smoother path to approval for Ethereum ETFs.

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