U.S. spot Ethereum (ETH) exchange-traded funds (ETFs) are preparing to launch as they file their amended S-1 application forms.
With a view to launch on Tuesday, July 23, and a 10-day streak of positive inflows into spot Bitcoin (BTC) ETFs this past week, market sentiment is beginning to look extremely bullish.
Today’s deadline to finalize Ethereum ETF applications has seen several funds submit their amended S-1 filings this week. This includes BlackRock, Grayscale, Fidelity, Invesco Galaxy, and Bitwise.
As per the S-1 filings, five Ethereum ETFs will offer starting fees of 0%, which will then peak at 0.25% after fee waiver periods lasting between six to 18 months.
The addition of spot ETH ETF tickers on Bloomberg’s trading terminal suggests that the ETH funds are on track for a July 23 launch.
When Grayscale converts its existing Ethereum Trust (ETHE) to a spot ETF, it will carry over approximately $10 billion in assets into the new fund. Unfortunately for investors, it, too, will carry the same 2.5% management fee. This is believed to be the driver behind GBTC’s enormous outflows of $18.71 billion.
Interestingly, Grayscale has a strategy in mind. Alongside ETHE’s conversion, it’s also planning to launch a separate spot ETH ETF, a mini fund, which will have 0.25% fees and be seeded with 10% of ETHE’s assets.
With plans to also launch a mini GBTC fund, Grayscale appears to be very aware that its 2.5% fee can’t compete with a majority of other funds. Notably, BlackRock’s IBIT, which offers fees of 0.25% and has garnered over $20 billion in net inflows since launching.
For now, it has been confirmed that spot Ethereum ETFs in the U.S. will not allow for staking. But pro-crypto SEC Commissioner Hester Peirce has noted that the inclusion of staking is “always open for reconsideration.”
Citing potential risks, the SEC is concerned with crypto staking, specifically as it pertains to the control and security of said assets when they are staked with a third party, e.g. an exchange or network.
Because of Ethereum’s shift to proof-of-stake (PoS), regulators have been investigating whether or not staking ETH constitutes an investment contract.
Under the Howey Test, staking ETH appears to meet the criteria, though the test fails to acknowledge the decentralized nature of Ethereum.