The SEC has authorized a rule modification to permit the establishment of ETFs based on ether.

• The decision comes less than six months after the SEC approved bitcoin ETFs.
• The industry has seen significant success with those funds, as net inflows have already exceeded $12 billion, according to FactSet.
• Bitcoin ETFs are predicted to be larger than Ether ETFs at first.

The SEC approved a rule change that would enable ETFs to invest in Bitcoin, one of the world's largest cryptocurrencies.

The success of bitcoin ETFs, with net inflows already surpassing $12 billion, has come less than six months after the SEC approved them.

The SEC's deadline for the VanEck Ethereum ETF in late May was a potential decision date for the ether funds.

Several companies that support bitcoin ETFs, such as BlackRock, Bitwise, and Galaxy Digital, are also considering launching an ether fund. However, the SEC's approval of rule changes does not guarantee that all funds will be launched.

The SEC has granted approval for various exchanges to list eight different ether funds, although the order does not approve the funds themselves or establish a date for the ETFs to commence trading.

The Grayscale Ethereum Trust currently has less assets than its bitcoin counterpart.

The approval of ether ETFs indicates that the SEC's stance on crypto may be changing after a series of legal battles. The agency lost a lawsuit against Grayscale in 2023, which led to the approval of bitcoin products.

Politicians have scrutinized the SEC's push to regulate crypto, with the Senate passing a resolution to withdraw an SEC staff bulletin about accounting rules for digital assets last week.

Ether, the second largest crypto asset, is often viewed as a blue chip coin alongside Bitcoin, although its value proposition is unique. Unlike Bitcoin, which is primarily seen as a long-term store of value, an investment in Ether is more akin to an investment in early stage technology. The Ether token powers the Ethereum network, which supports various applications, including decentralized finance (DeFi) projects, nonfungible tokens (NFTs), and the tokenization of real-world assets like commodities, securities, art, and real estate.

Richard Kerr, a partner at K&L Gates, stated that the applications approved on Thursday do not extend to other crypto projects on the Ethereum network.

Kerr stated that the approval of an ether product does not guarantee the approval of a similar product for other digital assets on the Ethereum platform.

Etherium offers staking opportunities for investors to earn interest on their ether holdings by locking up tokens on the network for a period of time. However, ether ETFs in the U.S. may not participate. The SEC has alleged in lawsuits against Coinbase and Kraken that staking-as-a-service offerings are unregistered securities. This month, Ark, Fidelity, and Grayscale updated their filings to remove staking from their proposals.

Swan Bitcoin's managing director and head of Swan Private, Steven Lubka, stated that the absence of staking in ETF products could lead to less demand for ether ETFs compared to bitcoin ETFs.

Lubka stated that the numbers will not correspond to the bitcoin ETF inflows, and there are some structural differences in the product that make it less appealing.