“Hell Has Frozen Over:’’ How US Politics And Donald Trump Sparked A Historic Breakthrough For Crypto Amid Ethereum ETF Approvals

On May 24, 2024

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It was a seismic week for crypto in the US, with two massive victories for the industry coming via the quick-fire approval of spot Ethereum ETFs and the progress of a bill designed to provide a clear regulatory framework.

The former had seemed impossible just a week ago, with Bloomberg ETF analysts putting the odds of ETH ETF approvals at ”slim to none.”

”The approval of The Financial Innovation and Technology for the 21st Century Act (FIT21) by the US House of Representatives on May 22 was another huge breakthrough, made possible only by 71 Democrats crossing party lines to join Republicans in voting for its approval. It was the first time a major crypto-related bill has cleared one of the chambers of Congress.

The ”sudden reversal in regulatory sentiment” earlier this week came after ”months of stalled conversations,” said JPMorgan analysts. And then, out of the blue, the Securities and Exchange Commission (SEC) was not only re-engaging with fund managers eager to launch Ethereum ETFs, but actually fast tracking the approvals process.

Ripple Labs CEO Brad Garlinghouse was so gobsmacked by the developments that he posted on X that it ”Feels like hell has frozen over!!”

Big momentum in crypto this week – ETH ETF passed and bipartisan support on crypto legislation…
Feels like hell has frozen over!! 🥶 https://t.co/70T0qLt1FH
— Brad Garlinghouse (@bgarlinghouse) May 24, 2024

Ethereum ETF Approvals Not The Most Important Thing

So, what changed? The answer seems to be simple: politics.

“The most important things here isn’t the ETF,” said Adam Cochrane, a partner at venture capital firm Cinneamhain Ventures, in a May 23 X post on X. ”It’s: Total change in stance by admin, that forces Gensler to concede.”

The root of that change was seemingly Donald Trump’s unexpected grab for the crypto vote in the upcoming presidential election. The man who once called Bitcoin ”a scam” had become not only ”fine with it,” but even willing to accept donations in crypto for his campaign to oust President Joe Biden.

The shift was part of a move to build a ”crypto army” to counter the ”anti-crypto army” led by Biden’s ”official surrogate [Senator] Elizabeth Warren,” according to a campaign statement.

“If you’re in favor of crypto, you better vote for Trump,” said the former president.

BREAKING: 🇺🇸 Donald Trump now officially accepts #Bitcoin for campaign donations. pic.twitter.com/ySkwNQT1D2
— Bitcoin Magazine (@BitcoinMagazine) May 21, 2024

Trump had thrown down the gauntlet to a Democratic party that Cardano founder Charles Hoskinson had accused of ”a coordinated effort to kill crypto.”

Electric Capital co-founder Avichal Garg warned that Biden clinging to his anti-crypto stance would see the digital asset voter community move “from Anti-Gensler to Anti-Biden to anti-Democrats.”

Without warning, crypto had made an unexpected debut as an issue in a presidential election.

The response from the Democrats is what crypto industry entrepreneurs have dreamed of for years. The SEC, long the industry’s bane with its regulation-by-enforcement strategy, began rolling out the red carpet early this week for fund managers from BlackRock to Fidelity that had applied to launch Ethereum ETFs. And, within just a few days, they were approved.

What Comes Next?

Wider mainstream adoption, greater regulatory clarity, and possibly even the reinvigoration of the US crypto industry.

Standard Chartered analyst Geoffrey Kendrick sees the week’s developments as a ”watershed moment” for crypto and told The Block that Solana ETFs and XRP ETFs are likely to follow Bitcoin and Ethereum by gaining regulatory approval in 2025.

“The core technology is so similar to ETH it would be difficult for the SEC to claim they were securities given the ETH position,” he said. “The crypto industry now seems to have political backing on both sides of the aisle.”

Fund manager VanEck agrees. Head of digital assets research Matthew Sigel posted on X that the improved political backdrop ”will lead to further victories for digital asset investors and developers, via new laws and in the courts, that draw investment to bitcoin, ethereum and other open-source blockchain software.”

We are so thrilled to confirm that the SEC has approved, pursuant to Section 19(b) of the Securities Exchange Act of 1934, our exchange partner CBOE’s proposed rule change to list and trade a @vaneck_us spot #Ethereum ETF on the CBOE! 🥳🚀
TLDR: We expect the improved political… pic.twitter.com/o6ZbFWKExi
— matthew sigel, recovering CFA (@matthew_sigel) May 23, 2024

Greater regulatory clarity looks likely now, too, with the possibility that the more crypto-friendly Commodity Futures Trading Commission (CFTC) gains a bigger role in overseeing the industry. The SEC has now de facto conceded that Ethereum is not a security, while the passage into law of FIT21 would give the CFTC more power and funding to oversee digital commodities.

In short, the US crypto industry finds itself in a sweet spot after a week that delivered it a huge shot in the arm. It now seems a long time ago that prominent crypto figures were warning of the danger that the industry shifts out of the US because of its hostile regulatory regime.

Said Trump, “If crypto is moving out of the U.S. because of hostility toward crypto… well, we’ll stop it.”