In Markets

Crypto markets surged this morning after reports the SEC may actually approve an Ether ETF this week. At the time of writing Bitcoin was up 13% for the week to A$106,790 (US$71.3K) and Ethereum was up 24% to A$5,535 (US$3,693) – however markets were rising fast. Everything else was up including Solana (26%), XRP (6%), Dogecoin (9.6%), Cardano (14%) and Shiba Inu (9.1%). The Crypto Fear and Greed Index is at 76 or Greed.

In Headlines

Ethereum ETF back on

Even ETH diehards had written off the chances of an Ether ETF approval in May, but that all changed today after reports emerged that the SEC has asked exchanges that want to trade shares of the ETH ETFs to update 19b-4 filings. The Block also reported sources saying that at least one ETF issuer had been in talks with SEC. Bloomberg’s ETF analysts sheepishly revised up the chances of approval from 25% to 75%, after confidently asserting for months the ETF was extremely unlikely to happen in May. Polymarket had the odds of approval at 58% at the time of writing. The final deadline for VanEck’s and ArkInvest/21 Shares’ ETH ETF applications are May 23rd and 24th respectively. If the ETFs are approved it could be weeks to months before the required S-1 approvals enable them to launch. With ETH balances on exchanges at historic lows and so much of the supply staked the news is very bullish for the price. However, possible outflows from Grayscale’s US$8.7B ETHE (A$13B) product could dampen enthusiasm. Many pundits believe the SEC’s apparent 180 was due to political pressure after crypto became an election issue. However, the SEC had also snookered itself legally by previously approving ETH Futures ETFs, which is how the Bitcoin ETFs got approved.

Crypto’s political fortunes change

The Biden administration’s war on crypto faltered this week after a dozen Democrats including Senate Majority leader Chuck Schumer joined Republicans to pass a disallowance resolution to overturn the SEC’s SAB 121 guidance. The SAB 121 guidance made banks hold the equivalent in cash of the value of the crypto custodied, effectively preventing banks from holding crypto. This meant the Bitcoin ETFs had to use Coinbase to custody Bitcoin even though the exchange is being sued by the SEC. President Biden previously threatened to veto the legislation, but with 32 members of his own party jumping ship and Donald Trump opportunistically coming out as pro crypto, that threat might be reviewed. CEO of the blockchain trade association Digital Chamber, Perianne Boring said Schumer’s support could force the white house to “rethink its strategy and position” and that she believed “the tides are turning for crypto in Washington.”

Another pro crypto bill passes House

Hot on the heels of the SAB 121 Senate vote, the House of Representatives today passed the Deploying American Blockchains Act by 334 to 79. The bill directs the secretary of commerce Gina Raimondo “to take actions necessary and appropriate to promote the competitiveness of the United States [in] blockchain technology or other distributed ledger technology.” The secretary will be the principal advisor to the president on Blockchain and a committee of industry, government and academic experts will present an annual blockchain report to congress.

FIT21 up for a vote

The Financial Innovation and Technology for the 21st Century Act (FIT21) is coming up for a vote, and will be the next bellwether of how politics around crypto is changing. The bill “could make regulating crypto in the U.S. much clearer for everyone working in the industry or wanting to build in this space” according to crypto VC firm a16z. FIT21 treats decentralised cryptocurrencies as commodities and centralised crypto projects as securities. It also provides a pathway for projects to launch legally in the US and provides more oversight over exchanges.

Prometheum rises

Controversial digital asset firm Prometheum soft launched today. The firm is seen as something of a Trojan Horse for the SEC, as it treats ETH as a security rather than a commodity. Prometheum co-CEO Aaron Kaplan told Fortune that trading services would begin this quarter. “It marks the first time that… an investment contract digital asset security is being custodied and treated under the securities laws,” he said.

Bitcoin ETFs are back in black

May’s spot Bitcoin ETF inflows have already made up for April’s negative outflows according to Bloomberg ETF analyst Eric Balchunas. “The Bitcoin ETFs have put together a solid two weeks with US$1.3 billion (A$1.95B) in inflows, which offsets the entirety of the negative flows in April – putting them back around high water mark of US+$12.3 billion (A$18.4B) net since launch,” he wrote. Last week’s ETFs inflows totaled $939 million, equating to 14,000 Bitcoin or 31 days’ worth of mined Bitcoin. Even Grayscale has now hit four days of positive inflows in a row. First quarter reports show 414 institutions have shares in the ETFs.

Tornado Cash dev gets 64 months in jail

A Dutch court sentenced Tornado Cash developer Alexey Pertsev to 64 months in jail over the laundering of US$1.2 billion (A$1.8B) in crypto. While Pertsev only developed the code that enables crypto users to keep their transactions private, the fact he profited from a protocol which did not deter bad actors from laundering money saw him convicted. Raphaël Bloch, co-founder of The Big Whale called the decision “dangerous” because Pertsev had only developed an open source tool. “Condemning him is like condemning a knife or car manufacturer whose users would have behaved in a wrong way,” he wrote. Persev is appealing over the verdict.

DTCC and Chainlink

The Depository Trust & Clearing Corporation released a report on its Smart NAV pilot, a collaboration with Chainlink and 10 major financial institutions including JP Morgan and Franklin Templeton. The pilot aimed to determine if Net Asset Value data could be standardised and recorded via blockchain. LINK soared 20% after the report’s release.