The US Securities and Exchange Commission SEC has fundamentally cleared the way for exchange-traded funds (ETFs) in the cryptocurrency Ether. On Thursday, the SEC allowed, among others, the technology exchange Nasdaq and the New York Stock Exchange to trade financial products based on the Ethereum database (Blockchain).

Interested providers like BlackRock and Fidelity, however, still require individual approval from the authority, as evident from an SEC announcement. No deadline for this has been set initially. Such funds have already been approved for the most well-known digital currency, Bitcoin, since January.

The approval of Bitcoin spot ETFs was seen as an important milestone to open up digital currencies more to traditional investors. Investing in such funds instead of directly in cryptocurrencies is a lower barrier for many investors.

Ether is the second most important digital currency after Bitcoin. While Bitcoin primarily serves as a digital store of value, Ethereum is an open-source platform for creating and implementing digital contracts ("Smart Contracts") and decentralized applications.

From a legal perspective, Bitcoin is considered a commodity like gold, whereas Ether is more likely classified as a security by the SEC, as participants in the Ethereum blockchain's transaction validation ("Staking") deposit a certain number of Ether as collateral and in return receive a sort of dividend.

The SEC, under its chief Gary Gensler, is generally skeptical about cryptocurrencies and had been blocking the approval of spot ETFs for years. The agency gave the green light to Bitcoin in January, albeit not entirely voluntarily. After the rejection of an application by the company Grayscale, the SEC had to accept a defeat in court. An appellate court found that the decision was arbitrary because the SEC did not clearly distinguish it from already approved investments. ETFs based on Bitcoin futures contracts had already been approved in 2021.

Bitcoin and Ether ETFs Will Not Be Available in Germany, as Current Law Does Not Allow ETFs That Are Based Solely on a Single Underlying Asset. However, for European Investors, There Are Already Several Exchange-Traded Cryptocurrency Products, Known as Exchange-Traded Products (ETPs), Which Are Legally Distinct from ETFs but Function Similarly.

The highly anticipated SEC decision led to significant price gains for Ether last week. On Friday, the price was still up about 20 percent for the week, even though recent profit-taking caused a dampening of around three percent. Since the beginning of the year, Ether has gained about 56 percent against the US dollar, while Bitcoin has been up just under 52 percent in the same period. However, cryptocurrencies are notorious for strong price fluctuations, which is why consumer advocates generally do not recommend them as an investment.