Following the approval of the first Bitcoin ETF in the US, a similar Ethereum (ETH) ETF is awaiting approval.
Ethereum ETFs, US vs. the rest of the world
As with Bitcoin, the ETF will most likely be based not on physical ETH, but on Futures contracts on the price of ETH.
However, this only concerns the US market, since abroad the situation is different.
First of all, it has to be said that ETH-only collateralized funds whose shares are exchange-traded have been around for some time.
Although the first funds of this type were collateralized in BTC, and thus reflected the price of Bitcoin, it was not long before they were joined by similar funds collateralized in ETH.
In this respect, one of the most active companies by far is the Swiss company 21Shares, which actually put its 21Shares Ethereum ETP on the market in March 2019 with the ticker 21XE and ISIN CH0454664027.
It is an ETP traded on several European exchanges, including of course the Swiss SIX in Zurich, but also the Deutsche Boerse Xetra in Frankfurt, other German exchanges such as Stuttgart and Duesseldorf, as well as the Austrian exchange in Vienna.
It has an AUM of more than $558 million, so it is certainly not one of the largest European ETPs, and it entrusts Coinbase with the custody of ETH.
It is an ETP based on physical ETH, which is precisely the type of ETH that the US SEC is determined not to approve.
The case of Canada
The ETF that will probably be approved in the coming months in the US will not be based on physical ETH, but on Futures contracts on the price of ETH.
For this reason, it is possible that ETFs that are traded on the Canadian exchange in Toronto, the 16th largest in the world, will continue to attract many investors.
For example, the ETF on physical BTC on the Toronto exchange was launched back in February to considerable success, albeit less than the Bitcoin Futures ETF launched in October in the US. And in the course of the following months, other ETFs were already launched in Toronto, including ETH, apparently based on physical tokens.
Hence, there are already ETH ETFs on various markets, both on the European and Canadian exchanges, which are usually based on tokens physically stored by a secure custodian.
There are no ETFs on US exchanges yet, but there may be some in the near future, in the next few weeks or, more likely, in the next few months. However, these will not be ETH-based ETFs, but ETFs based on ETH price futures contracts. Considering the huge success of Bitcoin futures ETFs in the US market from the start, it is likely that these will also be very successful.
Futures-based ETFs and the SEC’s obstinacy
The thing that investors like most about these ETFs is that they can invest in them using the platforms they already have in place to trade the stock markets they already operate on, so they can use them with a few simple clicks, without new registrations or activations. At that point, even if they are not based on physical tokens, but on futures contracts, they do not have too many problems using them.
But note again how anachronistic the SEC’s refusal to approve ETFs based on physical tokens for the US markets sounds. Given that these are by far the largest markets in the world, it seems almost absurd that they have decided to lag behind the others.