Federal regulators on Thursday approved an investment product linked to the cryptocurrency ether, the most valuable digital asset after bitcoin, in a major boost to the cryptocurrency industry.
The U.S. Securities and Exchange Commission said a group of exchanges may begin listing an investment product called an exchange-traded fund (ETF) tied to the price of Ether. The product could offer an easier and simpler way for people to invest in the cryptocurrency, boosting prices and encouraging broader adoption of the digital currency.
In January, the SEC approved a similar product to track bitcoin’s price, sparking a surge in new investment and helping send the cryptocurrency’s price to an all-time high.
It could take longer for the impact of Ether’s approval to be felt in the market. Before exchanges can start offering Ether ETFs, the SEC also needs to approve another set of applications from companies hoping to issue ETFs, including big financial firms such as BlackRock and Franklin Templeton. Financial experts say the process could take anywhere from a few weeks to a few months.
An SEC spokesman said the agency could not comment beyond formal orders regarding product approval.
The news sparked celebrations in the cryptocurrency world, with a representative from 21Shares, one of the companies exploring offering an Ethereum investment product, calling it an “exciting moment for the entire industry.”
But industry critics said the approval was a dangerous development that would encourage more widespread investment in a volatile market.
“The SEC has failed in its mission to protect investors and the markets,” Benjamin Shifrin of Better Markets, a nonprofit group that advocates for stronger financial regulation, said in a statement.
ETFs offered by mainstream financial services firms are essentially baskets of assets. Clients buy shares in these baskets rather than buying the assets directly. These products are easy to trade through brokerage accounts with firms like Vanguard and Charles Schwab, and are popular with wealth advisors and other money managers.
In the cryptocurrency world, ETFs offer another key advantage: simplicity. Without the complexities of an online cryptocurrency wallet, customers can buy Bitcoin or Ethereum ETF shares online alongside stocks traded on Wall Street.
For years, crypto advocates have seen these products as a promising way to encourage broader use of the digital currency. Before the Bitcoin ETF was approved, crypto companies fought the SEC in court, winning a legal victory in August that forced the SEC to allow the products.
Bitcoin ETFs have become hugely popular and have attracted billions of dollars in investment.
Ether prices have recovered in recent months after a cryptocurrency slump that began in 2022. Ether is currently trading at around $3,800 per coin, down more than 20% from a high of just under $4,900.
This is a fraction of the price of Bitcoin, which trades at around $68,000 per coin.
