SEC has delayed the applications for Ethereum spot ETFs from Fidelity, BlackRock, and Grayscale this week, which was anticipated by market analysts. The key date is in mid-May.
Following the approval of a Bitcoin spot ETF in the United States, there is widespread optimism that an Ethereum spot ETF will also be approved this year. However, the U.S. Securities and Exchange Commission (SEC) stated that it is still carefully considering the proposals. After delaying the applications from Fidelity and BlackRock, the SEC further delayed Grayscale’s application to convert its Ethereum Trust product (ETHE) into a spot ETF.
Questioning the vulnerability of the PoS mechanism to manipulation, the SEC issued an order yesterday, requesting the proposal to undergo proceedings and solicit public opinions. In addition, the SEC specifically inquired about Ethereum’s proof-of-stake mechanism in the document, raising concerns about whether ETH, controlled or influenced by a small number of individuals or entities, could be susceptible to fraud and manipulation risks for the fund. According to the SEC, the public comment period is 21 days, with a rebuttal period of 35 days.
The crucial date is May 23rd, and prior to Grayscale, the SEC also delayed decisions on Ethereum spot ETF proposals from BlackRock and Fidelity in the past week. Analysts currently hold both optimistic and pessimistic views on whether a spot Ethereum ETF will be approved soon, following the approval of a spot Bitcoin ETF earlier this month.
However, Bloomberg ETF analyst James Seyffart suggests that the SEC’s delays on a spot Ethereum ETF may occur sporadically in the coming months, with the next key date being May 23rd. Whether ETH is considered a security becomes a crucial factor for the approval of a spot ETF. Among all cryptocurrencies, only Bitcoin is currently regarded by the SEC as a valuable store of value, while Ethereum still has the potential to be classified as a security, posing another major obstacle for the approval of an Ethereum ETF by the SEC.
It is worth mentioning that the opaque stance of Gensler regarding Ethereum being a potential security might play a role in the decision. In fact, the U.S. Commodity Futures Trading Commission (CFTC) is more inclined to view ETH as a commodity. Additionally, last year’s court ruling in favor of Ripple, stating that XRP is not a security in secondary market transactions, will make “Gensler taking a position that most digital assets are securities” a difficult battle.
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