Valkyrie CIO anticipates spot Ethereum ETF approval will take 1-2 years

A spot Ethereum exchange-traded fund may not be coming anytime soon, but it could see approval in the next year or two, says Valkyrie Chief Investment Officer Steven McClurg. 

Big name firms, such as Fidelity and BlackRock, have applied for a spot Ethereum ETF over the last few months as some analysts predict that the Securities and Exchange Commission could approve those products as early as May of this year. Valkyrie is not currently vying for a spot Ethereum ETF. 

This comes as the crypto industry is on a high after the SEC approved the first spot bitcoin ETFs in the U.S. last month. The funds have since brought in billions of dollars. 

A spot ether ETF won't be coming anytime soon, but it could come in the next year or two, McClurg said in an interview with The Block on Thursday. 

"There was a lot of work put into getting spot bitcoin launched on behalf of regulators and the SEC, as well as the issuers," McClurg said. "It's a new asset class so there's a lot to learn." 

There are a lot of differences between bitcoin and ether, he added. 

"So I think it will take the SEC a lot of time to get their head around what disclosures look like for a product like that,' McClurg said. "So it could take another year just to understand the disclosure aspect." 

Some of the applications for a spot Ethereum ETF have included a staking component, which McClurg said could add another layer. 

"It would be very difficult to offer eth staking without deeming that to be a security feature," McClurg said. 

S&P Global Ratings analysts have said staking could increase Ethereum's concentration risk, in a report published Tuesday. Ark Invest and Franklin Templeton have said they aim to generate additional yield by staking the underlying ether. 

A potential XRP ETF?

McClurg also spoke about the possibility of a spot XRP exchange-traded fund, given its run in the courts. Ripple, the company behind XRP, was sued by the SEC in 2020 and accused of illegally raising money through an unregistered XRP offering. 

Over the summer, a judge's ruling differentiated the legality of Ripple's sales of XRP; some did not violate securities laws because of a blind bid process in place for them, while other direct sales of the token to institutional investors were classified as securities. 

Bitcoin, ether and XRP have all been deemed to not be securities either by the SEC or through the courts, McClurg said. Whether ether is a security has been up for debate as SEC Chair Gary Gensler has not directly said whether the asset would have to abide by the securities laws or not. 

"So that's why it's on top of mind," McClurg said. "I think there's a few others that might be deemed later to also not be securities that can be held in an ETF, but we'll see what happens over the next year."