With Donald Trump’s election, the crypto community anticipates a new SEC leadership that could open doors for Ethereum ETFs and significantly boost Ether's price. This article explores the implications of a potential transition in the SEC and its impact on the cryptocurrency landscape.


As the dust settles on Donald Trump’s recent election victory, the cryptocurrency landscape is rife with speculation regarding the future of the U.S. Securities and Exchange Commission (SEC). There is a palpable anticipation that a change in leadership could reshape the regulatory environment surrounding cryptocurrencies—particularly Ethereum (ETH) and exchange-traded funds (ETFs). Industry observers believe that a new SEC chair may significantly lower regulatory barriers for staking rewards in spot ETH ETFs, unleashing pent-up demand and enhancing Ether’s market performance.


Trump's intention to appoint a more crypto-friendly SEC chair comes on the heels of widespread discontent with current chair Gary Gensler’s stringent regulatory approach. His methodology, often described as "regulation-by-enforcement," has frustrated many within the digital asset community. Remarkably, Trump’s immediate action upon assuming office could involve demoting Gensler, replacing him with a commissioner who aligns more closely with pro-crypto sentiments, thereby accelerating an environment favorable for staking in ETFs.


While the president cannot simply fire the SEC chair, Andrew Rossow, a cyber and digital media attorney, notes that the president can transfer the chair’s role among commissioners. This strategy allows quick leadership changes without extensive bureaucratic hurdles. Though a direct dismissal may evoke political backlash, it is clear that Trump’s administration would prioritize a crypto-friendly stance, potentially signaling a seismic shift in how the SEC approaches digital assets.


Historically, investments in Ether have lagged behind those of Bitcoin and even its rival Solana (SOL). Market analysts often cite the lackluster inflows into spot Ether ETFs as a major factor hindering Ether's growth trajectory. For perspective, BlackRock’s recent spot Bitcoin ETF experienced inflows surpassing $1 billion in just one day, driving total assets under management (AUM) over $25 billion. In contrast, BlackRock’s iShares Ethereum Trust ETF peaked at approximately $86 million—an underwhelming response that echoes growing concerns over the marketability of ETH compared to BTC.


Nevertheless, experts like Federico Brokate, head of U.S. operations for crypto ETF issuer 21Shares, express optimism. He suggests that the underperformance of ETH ETFs is primarily due to the absence of staking options, which could provide investors a source of passive income. The lure of staking could entice crypto-native and adjacent investors who, in the absence of yield, have remained hesitant to engage. 


Tom Wan, an on-chain data researcher, highlights the significant potential for spot Ether ETFs to compete with their Bitcoin counterparts if they introduced staking rewards. According to Wan, ETF issuers could optimize their structures to provide staking rewards, effectively circumventing management fees and appealing to investors enticed by yield generation. His analysis indicates that merely staking a fraction—25%—of assets under management could potentially cover ETF fees entirely, offering investors an attractive alternative to higher-fee alternatives.


However, allowing staking within ETFs isn’t straightforward. The SEC’s current stance views staking as akin to investment contracts, suggesting that staking operations fall under securities regulations, which mandate compliance, disclosures, and investor protections. Despite a push for innovation from industry stakeholders, legal hurdles remain, emphasizing that while a new SEC chair could loosen the reins, lasting changes would require consensus among SEC commissioners.


Goforth, a law professor specializing in business associations and regulation, cautions against overestimating how readily a new chair can enforce policy changes. Even with a more pro-crypto figure assuming the office, the commission comprises multiple members whose joint consensus is required. This points to the ongoing complexity within the regulatory framework that cryptocurrencies operate within.


Should the SEC succeed in creating a more accommodating environment, the potential for a rapid increase in institutional and retail investment in Ethereum is vast. With altcoin ETFs for crypto assets like XRP or SOL still on hold while the regulatory landscape transforms, Ether could emerge as an appealing choice for both types of investors seeking clear value propositions.


In conclusion, the anticipated transition in SEC leadership could indeed lead to transformations within the cryptocurrency landscape, particularly benefiting Ethereum and its potential ETFs. The prospect of permitting staking in ETH ETFs represents a potential game changer for institutional adoption, increasing retail interest, and ultimately influencing Ether’s price positively. As the crypto community keeps a keen eye on legislative developments in the coming months, the landscape may soon find itself at a transformative juncture that aligns regulatory frameworks with burgeoning market demand.


(Daniel Ramirez-Escudero, Cointelegraph, 2024)