Galaxy Digital's Alex Thorn suggests that the SEC may classify pledged Ethereum as a security in an attempt to find a loop for spot ETF approval.
The US Securities and Exchange Commission (SEC) may be taking a surprising turn when it comes to approving exchange-traded funds (ETFs), according to Galaxy Digital's head of research, Alex Thorne.
in Share X On May 21, Thorne predicted that the SEC could make a fine distinction between Ethereum and ETH, potentially classifying the latter as a security.
“If the speculation about the SEC’s 180 on Ethereum ETFs is true, I would think they are trying to thread a needle between ‘ETH’ that is not a security and ‘ETH’ (or even more tenuously, ‘ETH staking as a service’) that is a security.” “
Alex Thorne
This differentiation could have major implications for Ethereum ETFs, which the SEC has been reluctant to approve so far.
Thorne says the change in strategy is in line with the SEC's ongoing legal battles and investigations, allowing the agency to approve Ethereum ETFs while sticking to its previous arguments and positions. However, the chosen approach may also include specific restrictions on Ethereum ETFs, Thorne says.
“In this case, and perhaps for other reasons, you would expect the SEC to prohibit ETFs from storing the Ethereum they hold.”
Alex Thorne
By distinguishing between ETH and ETH, the SEC can navigate the complex regulatory landscape, potentially allowing the introduction of Ethereum ETFs while maintaining a strict regulatory framework around staking assets and other altcoins. However, it is not clear how exactly the SEC will treat, for example, tokenized versions of Ethereum or Bitcoin for use in Layer 2 solutions (including lending).
Meanwhile, the price of Ethereum rose more than 17% following news that the SEC may actually approve spot ETFs for Ethereum, despite previous market consensus that the watchdog would not give the green light.
Eric Balchunas, a senior analyst at Bloomberg, who previously said the odds of an Ethereum spot ETF being approved are “slim to none,” changed course on May 20. In Publication