This Tuesday, July 23, marked the launch of Spot ETFs for Ethereum for cryptocurrency investors in the US. After a long and arduous legal battle, American investors can not only buy Bitcoin ETFs through the stock exchange but can also take advantage of another investment option.
European cryptocurrency investors watched this successful launch of Ethereum ETFs on Wall Street and wondered how this development would affect the market on the continent. To help answer this question, we provide a brief overview of Spot ETFs.
The Product
Spot ETFs are financial vehicles based on derivatives that facilitate investment in a wide range of products, namely, stocks, debt securities, and precious metals. Canada was the pioneer in making ETFs available in 1990. Three years later, the product appeared in the US market. Finally, in 2000, ETFs were adopted in the European market.
The Legal Saga
Cryptocurrency Spot ETFs became quite popular, although this emergence was marked by legal challenges. This is because the SEC, the US Securities and Exchange Commission, delayed the approval of applications for these funds, arguing that they could pose a security risk.
However, the SEC was unable to sustain its argument in court when the Grayscale fund sued the commission and won the case in October 2023. This legal victory opened the way for the favorable approval of applications submitted by other funds, which only happened seven months later.
The delayed but favorable outcome has now left investors questioning whether other popular cryptocurrencies like USDT, Cronos, Ripple, and Solana will also become available as Spot ETFs.
Possibilities for the European Market
Financial giants offering Ethereum Spot ETFs, namely Blackrock, Grayscale, Bitwise, Fidelity, VanEck, Ark 21 shares, Franklin Templeton, and Invesco Galaxy, recorded inflows of approximately €470.55 million in the last 24 hours.
This successful launch may prompt global funds to make Spot ETFs available in the European market. However, MICA, the European agency regulating the trading of crypto assets, currently imposes several legal restrictions on the marketing of Spot ETFs in the region.
European investors can currently invest in ETNs, which operate as a bond, as they are issued as debt notes rather than investments in a fund. The Kraken platform, a reliable and user-friendly cryptocurrency exchange, also offers European clients the option to buy Ethereum.
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