SEC expected to reject new Ether ETFs this week
The U.S. Securities and Exchange Commission will issue their decision for Ethereum exchange-traded funds or ETFs this week.
The obvious purpose is to potentially deny on the basis that these spot filings are improperly filed as commodity-based trust shares and do not qualify if they are holding a security.
— Scott Johnsson (@SGJohnsson) May 14, 2024
While spot bitcoin ETFs from financial powerhouses like Fidelity, BlackRock, and VanEck have recently seen significant success, experts anticipate that the SEC is unlikely to greenlight similar Ether ETFs at this time.
SEC chair Gensler on crypto ETF challenges
Speaking with CNBC, SEC Chair Gary Gensler highlighted that although cryptocurrency constitutes a minor segment of the markets monitored by the SEC, it disproportionately harbors scams, frauds, and issues. He pointed out that much of the crypto industry operates without adherence to the safeguards established by securities laws.
Gensler did not give a clear answer when asked if Ethereum is a commodity or a security and if there will ever be an ETF for it. He said the main question is how to keep American investors safe.
SEC decision deadline this week on spot eth ETFs…
SEC must approve both the 19b-4s (exchange rule changes) & S-1s (registration statements) for ETFs to launch.
Technically possible for SEC to approve 19b-4s & then slow play S-1s (esp given reported lack of engagement here).— Nate Geraci (@NateGeraci) May 19, 2024
Currently, investors are not receiving the necessary information. The intermediaries in this centralized market often have conflicts of interest and are engaging in practices that wouldn’t be permitted on the New York Stock Exchange.
Gensler was noncommittal when asked about an Ethereum ETF, stating that the filings will be reviewed when the time is right.
Gary Gensler’s position is key to Ethereum ETFs’ approval. However, companies behind Bitcoin ETFs doubt that the SEC will approve Ethereum in the same way. VanEck CEO Jan van Eck told CNBC they were the first to apply for an Ethereum ETF in the U.S., but he thinks their application will probably be denied.
Meanwhile, in an interview with Investing.com, Roshan Shah, Co-founder and CEO of Decimal Digital Currency, noted that Bitcoin ETFs were approved due to a court ruling after the Grayscale conversion in August 2023. He highlighted that there is no similar court ruling to support the approval of Ether ETFs.
According to Shah, the markets are still in the early stages of grasping Bitcoin, whereas understanding Ether presents a much greater complexity. The SEC aims to protect pensions, 401ks, and retirement funds by keeping them away from Ether investments for the time being.
Regulators are cautious about the potential for a slippery slope that began with Bitcoin ETFs. If Ethereum ETFs are approved, it might pave the way for a wide range of other digital assets to enter public markets.
Shah explains that protecting precedent is crucial for the SEC. He suggests that the justification for rejecting crypto assets in an ETF gets weaker with each new approval.
Shah further points out that the SEC is likely to delay decisions on Ether ETFs continually. This delay could persist indefinitely, possibly only ending if the courts mandate an approval, reminiscent of what happened with Bitcoin ETFs.
On the other hand, Charles d’Haussy, CEO of dYdX Foundation, expressed to Investing.com that, while he holds an optimistic view on the future approval of a spot Ethereum ETF, he would be surprised if the SEC approved it at this stage.
If the SEC denies approval for spot Ethereum ETFs, legal battles will be almost inevitable, as seen previously with Bitcoin ETFs. Interestingly, futures-based Ethereum ETFs have already received the green light.
According to d’Haussy, the SEC’s stance on Ethereum ETFs could mirror its approach to Bitcoin ETFs. However, an important distinction is that spot Ethereum ETFs might be less appealing compared to directly holding ETH due to the lack of staking reward distributions.
Ethereum’s recent 3.8% weekly rise
Over the past seven days, Ethereum has seen a rise of around 3.8%, recovering from a dip experienced between mid-March and mid-May. Despite this earlier decline, the cryptocurrency remains in a strong position.
This year alone, Ethereum has climbed over 35%, and it has surged more than 69% over the past 12 months. The general crypto market, led by Bitcoin, has also surged, adding momentum to Ethereum’s growth. Investors have been eagerly anticipating potential Ethereum ETFs, contributing to the renewed interest.
