The recent approval of spot Ethereum ETFs in the U.S. has sent shockwaves across the crypto industry, reigniting speculation about which digital asset might be next in line. In a candid conversation, Colin from Wu Blockchain sits down with attorney Dongbing to unpack the legal, political, and market dynamics behind this pivotal moment — from the surprise greenlighting of ETH ETFs to the future prospects of Solana (SOL) ETFs and the landmark FIT21 legislation shaping crypto regulation.
Why Was the Ethereum Spot ETF Approved So Suddenly?
The approval of Ethereum spot ETFs didn’t come out of nowhere — it was built on the foundation laid by Bitcoin’s ETF victory earlier in 2024. When the SEC approved Bitcoin spot ETFs in January, it released a detailed policy rationale based on what’s known as the Ark Analysis Test, a framework developed by Ark Invest and formally adopted by the SEC.
This analytical model hinges on three core criteria:
- Existence of a mature futures market: Specifically, regulated futures contracts traded on established platforms like CME (Chicago Mercantile Exchange).
- Minimal price divergence: The spot price and futures price must remain closely aligned, indicating resistance to manipulation.
- Market stability: The futures market must have demonstrated consistent performance over time.
👉 Discover how ETF approvals are reshaping crypto investment strategies.
Bitcoin met these conditions, setting a precedent. Once that door opened, rejecting Ethereum under similar circumstances would expose the SEC to legal challenges over unequal enforcement — especially after its loss in the Grayscale v. SEC case. With Ethereum also listed on CME and showing strong correlation between futures and spot prices, continued denial became legally indefensible.
Thus, the SEC’s May 23 approval of Ethereum spot ETFs wasn’t just regulatory evolution — it was legal necessity.
The Hidden Role of U.S. Political Dynamics
While legal logic drove the decision, politics played an equally critical backstage role. The U.S. is deeply divided on crypto policy, with Republicans generally supportive and Democrats more cautious. However, two key developments shifted the balance:
FIT21 Act Gains Momentum
The Financial Innovation and Technology for the 21st Century Act (FIT21), passed overwhelmingly in the House of Representatives, aims to clarify jurisdictional boundaries between the SEC and CFTC. Under FIT21:- Securities go to the SEC.
- Commodities go to the CFTC.
The determining factor? Decentralization, measured primarily by token holder concentration. If no single entity holds more than ~20% of voting or economic power, the asset is deemed sufficiently decentralized and classified as a commodity.
Ethereum clearly fits this definition — unlike many other tokens. With FIT21 signaling a clear path for Ethereum as a non-security, the SEC likely chose not to fight a losing battle.
- Election-Year Pressure
With Trump openly embracing crypto and criticizing Biden’s perceived ignorance on the topic, the administration faced pressure to appear pro-innovation. Young, tech-savvy voters — a Democratic base — are increasingly pro-crypto. Allowing ETH ETFs was a strategic move to avoid alienating this demographic.
What Does This Mean for Ethereum’s Price?
From a valuation standpoint, attorney Dongbing remains bullish. He analyzes Ethereum through its ETH/BTC ratio, which historically traded between 0.06 and 0.08 during peak cycles. Recently, it dipped to around 0.04 — largely due to Bitcoin’s ETF momentum pulling capital away from altcoins.
Now that Ethereum has achieved ETF parity with Bitcoin, that gap is expected to close.
“If BTC reaches $100K in this cycle, ETH at 6x–8x that ratio puts it comfortably between $6,000 and $8,000.”
This outlook assumes favorable macro conditions and sustained institutional inflows. More importantly, Ethereum’s robust ecosystem — including DeFi, NFTs, and Layer 2 innovations — gives it stronger long-term utility than Bitcoin’s store-of-value narrative alone.
FAQ: Your Burning Questions Answered
Q: Does FIT21 define decentralization clearly?
A: Yes — though still evolving, FIT21 uses objective metrics like token distribution and voting concentration. Projects where one party controls over ~20% may be deemed securities.
Q: Could developers’ influence affect decentralization status?
A: Unlikely under current proposals. Legal focus is on economic control, not technical governance. As long as no single entity dominates holdings or voting rights, developer leadership won’t disqualify a project.
Q: Will the SEC continue investigating Ethereum?
A: Probably not. With ETH now treated as a commodity via ETF approval and FIT21 momentum, further probes into its securities status lack justification.
Q: Why hasn’t Solana gotten an ETF yet?
A: SOL lacks a CME-traded futures contract — a prerequisite for spot ETF consideration. It also faces scrutiny over past concentration risks (e.g., FTX’s large stake) and lower market cap compared to BTC/ETH.
Q: Are U.S. crypto policies becoming more favorable?
A: Yes — driven by legal precedents, political incentives, and institutional demand. The trend favors clear rules over blanket skepticism.
Q: Can other altcoins get spot ETFs soon?
A: Not imminently. Only assets with mature futures markets, high liquidity, and proven decentralization stand a chance — criteria few currently meet.
Is a Solana Spot ETF Likely?
Despite market hype, Solana spot ETF approval appears highly unlikely in this cycle, for three structural reasons:
- No Futures Market: Unlike BTC and ETH, Solana has no regulated futures product on CME or similar exchanges — a mandatory first step.
- Centralization Concerns: Historical concentration of SOL holdings — particularly FTX’s massive position before collapse — raises red flags about manipulation risk.
- Market Size & Liquidity: SOL’s market cap remains significantly smaller than BTC or ETH. Regulators prioritize stability; smaller markets are seen as more vulnerable.
Even if Solana strengthens its decentralization metrics, building a compliant futures ecosystem takes years. Approval before 2027 seems improbable.
👉 See how leading blockchains are preparing for institutional adoption.
Why Are Hong Kong Crypto ETFs Underperforming?
Hong Kong launched its own suite of crypto ETFs but has seen lackluster results compared to U.S. counterparts. Key reasons include:
- Limited capital pool: Hong Kong’s financial market is dwarfed by Wall Street.
- Restricted inflows: Mainland Chinese investors cannot currently use southbound funds for crypto ETFs.
- Higher fees & weaker distribution: U.S.-based giants like BlackRock and Fidelity have global reach and lower costs.
- Investor preference: Global institutions naturally favor U.S.-listed ETFs with deeper liquidity and stronger brand trust.
Until cross-border capital rules ease and fee structures become competitive, Hong Kong ETFs will struggle to gain traction.
What Projects Are Worth Watching?
Attorney Dongbing highlights Ethena, a novel synthetic dollar stablecoin project leveraging delta-neutral staking strategies. While offering attractive yields, he cautions investors:
“After Terra/Luna, we must remain vigilant. High returns come with protocol risks.”
He remains most optimistic about Ethereum Layer 2 ecosystems, where scalability improvements are unlocking new use cases in gaming, social apps, and decentralized AI — all poised for breakout growth.
👉 Explore emerging innovations in decentralized finance and Web3 infrastructure.
Final Thoughts: A New Era for Crypto Regulation
The approval of Ethereum spot ETFs marks more than a financial milestone — it signals a maturing regulatory framework where clear rules, political will, and market forces converge. With FIT21 paving the way for rational classification of digital assets, projects must now prioritize true decentralization to qualify for favorable treatment.
For investors, this means greater clarity and safer entry points via regulated products. For builders, it’s a call to align with compliance-by-design principles.
While Solana and others may wait years for ETF status, the path forward is now clearer than ever — built on transparency, decentralization, and institutional trust.