SEC Delays Decisions on Ethereum ETF Applications

The securities and exchange commission (SEC) has delayed decisions on applications for an Ethereum exchange traded fund (ETF).

Following the approval of 11 spot Bitcoin ETFs by the SEC this year, many of the approved Bitcoin ETF issuers have applied for Ethereum ETFs as well.

The SEC gave feedback on some of the applications a day before the January 25 deadline. The agency in a statement said it needs more time to review the proposed rule change for BlackRock’s application..

“The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change,” the SEC’s Assistant Secretary, Sherry Haywood, noted in the official filing.

“Accordingly, the Commission… designates March 10, 2024, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change,” it added.

The largest asset management firm with over $9.1 trillion in assets under management,  Nasdaq filed for the approval of iShares Ethereum Trust on behalf of BlackRock on December 11, 2023. This is the first time the SEC is delaying a decision on the application, but has to make a decision within 240 days. 

Similarly, the SEC has delayed a decision on Grayscale’s Ethereum ETF application. According to a statement by the agency on Thursday, it is soliciting for fresh public comments on the application. 

The SEC asked whether Ethereum’s proof of stake mechanism and “concentration of control or influence by a few individuals or entities” could bring up unique concerns to make the fund susceptible to fraud and manipulation. 

This is the second time the agency is delaying a decision on Grayscale’s application. It first delayed a decision on Grayscale’s application on December 5 2023. Comments are due in 21 days with a rebuttal period that lasts 35 days, the SEC said. 

Opinions on Ethereum ETF Approval

Immediately following the approval of Bitcoin spot ETFs, some members of the crypto community became optimistic that an Ethereum spot ETF could also be around the corner. Those optimistic about an Ethereum ETF this year have said it will work in a similar way to the Bitcoin ETFs.

“We anticipate a spot Ethereum ETF approval in May with an estimated 75% likelihood. This optimistic outlook is grounded in Grayscale’s Court of Appeals victory and the subsequent approval of Ethereum Futures ETF, collectively suggesting that the approval of a spot Ethereum ETF is only a matter of time,” said Matt Kunke, research analyst at crypto market making firm GSR.

On the contrary, some analysts also believe that an Ethereum ETF may not happen this year, or at least by May. They cited concerns around the SEC’s definition of Ethereum, saying the agency may have to clearly define Ethereum as a commodity first.

“In our opinion, for the SEC to approve spot Ethereum ETFs in May, it would need to classify Ethereum as a commodity (similar to bitcoin) rather than a security,” JPMorgan’s Nikolaos Panigirtzoglou said earlier this month. “This is far from given, and I wouldn’t put more than a 50% chance of the SEC classifying Ethereum as a commodity before May.”

Other Ethereum ETF Applications

Apart from BackRock’s and Grayscale’s Ethereum ETF applications, other top firms have applied. 

These include VanEck, ARK 21Shares, Fidelity, Invesco Galaxy, and Hashdex. The deadline for the decision on VanEck’s application is May 23, ARK 21Shares is May 24, Hashdex is May 30, Grayscale is June 18, and Invesco is July 5.

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