BlackRock Files Spot Ethereum ETF Application With US SEC
20 November 2023
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BlackRock, the world's largest asset manager, has made a significant move in the cryptocurrency space by filing for a spot Ethereum ETF with the U.S. Securities and Exchange Commission (SEC).
This filing aims to create an iShares Ethereum Trust that mirrors the performance of ether's price.
For this venture, BlackRock has chosen Coinbase, a major crypto exchange, to be the custodian of its Ethereum holdings.
This development comes shortly after BlackRock filed a similar application for a Bitcoin ETF in June 2023, which spurred a market rally, elevating Bitcoin's value to nearly $38,000.
However, the SEC has consistently rejected applications for a spot Bitcoin ETF.
There are currently 12 applications for a Bitcoin spot ETF.
Analysts say there is a high chance of a Bitcoin spot ETF launching, possibly in Q1 2024, though this is unconfirmed.
A Bitcoin futures ETF has existed since 2021.
What's the difference between a spot ETF and crypto exchanges?
Essentially, an ETF offers a way to gain exposure to the price movements of an underlying asset without holding the asset yourself, while a crypto exchange provides a platform to buy or sell cryptocurrencies directly.
The US SEC's stance on Ethereum, under Chair Gary Gensler, remains murky.
In 2018, while an MIT professor, Gensler suggested Ethereum might be considered "sufficiently decentralized" and not a security, echoing former SEC Director William Hinman's views.
However, Gensler has not confirmed this position as SEC Chair.
More recently in April 2023, SEC Chair Gary Gensler has said the SEC considers Bitcoin a commodity but refused to pin down Ethereum's Ether token at an oversight hearing. Read more here.
Decentralizing Ethereum: Vitalik Buterin's 10-20yr long roadmap for a simpler, resilient network.
Decentralization in crypto: A goal misunderstood. How to decentralize a system?
Blockchain's 51% paradox: Power, trust, and the fight to keep decentralization.
High US concentration of Ethereum nodes raises decentralization concerns. Lido issues.
Ethereum AWS outage causes centralization worries.
What Is The Importance Of Cryptos As Commodities Vs Securities?
The consideration of an Ethereum spot ETF is an interesting one.
In September 2022, Ethereum switched from Proof of Work (PoW), where it operated with mining like Bitcoin, to Proof of Stake (PoS).
It was a controversial switch, but it was one the Ethereum foundation deemed necessary to stay ahead of the increasing competition, like Solana and Cardano, who had already based their platforms on PoS.
The idea was to increase the system's efficiency by removing the wasteful mining process.
A downside was it caused Ethereum to centralize more.
The change reduced the amount of participants validating transactions on the network by increasing the barrier to entry so that there were fewer validators on the network.
Participants who wish to run a node on the network and earn fees for processing transactions, needed at least 32 of Ethereum's token Ether, to join in.
At the time of writing (Nov 2023), Ethereum's price hovers around USD $2,000.
This means USD $64,000 in Ethereum's Ether token is needed to join the network.
That's just the entry cost of the ticket too.
Servers and all of the I.T. management that goes along with network infrastructure are costs on top of this.
As the requirement was so high, "staking pools" emerged.
It's where people pool together their Ethereum tokens to gain enough power to participate.
Of course, the law of unintended consequences hit again, as Lido, the biggest of these staking pools, has dominated the staking pool market, raising even more centralization concerns.
This is why many raise the point Ethereum is more centralized than it was in 2018, when the SEC Chair first made these claims and it's probably why Gensler shies away from commenting on it now.
Blackrock's ETF development underscores the growing acceptance and increasing integration of cryptocurrencies into traditional systems.
It could further raise the interest of cryptocurrencies, across the industry.
More focus will turn to solving inherent issues in existing blockchain systems, forcing people to look for solutions.
Also, it highlights the importance of nailing the tough problem of decentralization.
Statements from regulators about Bitcoin's clear commodity status vs Ethereum's unclear status are key.
It's why the Zucoin team has been so focused on increasing decentralization.
A solid alternative to Bitcoin that solves many of its issues should increase efficiency and decentralization, not one or the other.
This is the goal Zucoin set out to achieve.
Ongoing developments in the crypto ETF space provide a solid ground for unique cryptocurrencies like Zucoin to demonstrate their strengths, showing they can solve issues in the fast-changing landscape of digital assets.
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All the best,
—Rob
MyZucoins
Disclaimer: Of course, this is not advice, financial or otherwise. It’s also important to consider the risks and challenges associated with any potential benefits.