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Author: Nikita Ovchinnik Source: blockworks Translation: Shan Oppa, Bitchain Vision
On May 23, 2023, the U.S. Securities and Exchange Commission (SEC) approved the first spot Ethereum ETF, an important milestone in the cryptocurrency market.However, while this is a positive decision, it is not a complete victory for the crypto community.
The move comes after approval of the Bitcoin ETF in January.The two approvals appear to indicate a shift in regulators’ attitudes towards digital assets, which undoubtedly leads to wider adoption.
However, waiting time for other cryptocurrency ETFs may be much longer than Ethereum.The SEC approval of the Ethereum ETF also symbolizes the dawn of a gradually forming regulatory environment that will be dangerous for decentralization and its main advocates.
Reasons for attitude change
It can be said that the SEC has come to its senses.The decision to approve the Ethereum ETF appears to be based on market pressure and strategic considerations.
Approval of the Ethereum ETF means the SEC clearly recognizes that major cryptocurrencies such as Ethereum and Bitcoin are becoming an integral part of the financial ecosystem – widely adopted, accepted and operated globally – require proper regulation by the authorities, not fragile “protectionist” opposition.By turning to this approach, SEC can leverage the vitality of the field while providing a structured environment to protect investors and maintain market integrity.
The SEC’s Ethereum ETF regulatory framework has improved investor protection through several key measures, mainly a comprehensive monitoring sharing agreement with institutions such as the Chicago Mercantile Exchange (CME), requiring transparent pricing and portfolio holdings, and requiring disclosureRisks associated with cryptocurrency investment.These measures have enhanced investors’ security in the cryptocurrency space.
The decision to approve the Ethereum ETF may also be affected by the need to maintain the U.S. competitive advantage in financial innovation.
Cryptocurrencies and blockchain have the potential to drive significant economic growth, enhance security in key industries, promote innovation through new business models such as decentralized finance (DeFi), and create new investment opportunities.By accepting cryptocurrencies, the SEC can help countries stay competitive.
One side wins is the other side’s loss
At first glance, the approval of the ETF appears to be a clear victory for crypto advocates, but it also heralds a tightening of regulation in many areas.
The SEC’s focus on preventing fraud and market integrity means that exchanges and wallets may face more scrutiny.This will force them to make a difficult choice between complying with regulations and risking being excluded from the mainstream financial system.
therefore,Realizing true decentralization becomes even more difficult.These platforms may soon have to choose between abandoning their principles and dealing with constant obstacles—namely, compliance burdens, increased costs and enhanced monitoring.These challenges require centralized supervision and data collection.Obviously, attempts to maintain the decentralization principle may lead to exclusion by mainstream finance, which may limit the user base and liquidity of these decentralized platforms.
Under current chairman Gary Gensler, the SEC has consistently sent a cautious, gradual signal, focusing mainly on transparency, market integrity and investor guarantees.Despite the approval of Ethereum ETFs, a large number of approvals from other alternative token ETFs – which will unlock huge growth potential for the industry and create an environment of trust and compliance that benefits all stakeholders – in the short term due to SECThe prudent attitude and ongoing concerns about market manipulation and investor protection are extremely unlikely.
As Gensler said in his statement after Bitcoin ETF approval,This [does not represent] the Commission’s view on the status of other crypto assets under federal securities laws or the current status of certain crypto asset market participants in the crypto asset market.
Most crypto assets are investment contracts and are therefore subject to federal securities laws.Investors should be cautious about the numerous risks associated with Bitcoin and its products whose value is pegged to cryptocurrencies.
Ultimately, the public decides their destiny
Although the decision to approve the ETH ETF is significant, the impact on the existing crypto community itself will be relatively limited.There will always be those who prefer the decentralized and anonymous nature of cryptocurrencies over regulatory compliance, and these purists are unlikely to turn to ETFs.
However, the Ethereum ETF will attract a wave of previously skeptical or indecisive new investors.I expect these new entrants to significantly increase market liquidity and drive wider adoption.
But while the ETF approval shows that the SEC is more open-minded, it also heralds regulatory challenges in many areas.However, this moment remains a critical step in integrating digital assets into traditional finance.
The fate of cryptocurrencies is now firmly in the community’s ability to navigate an evolving regulatory environment, as always, and also depends on the public’s willingness to accept these new financial products.
