The SEC Holds Off on ETH ETFs

The U.S. Securities and Exchange Commission (SEC) takes its time on whether to approve BlackRock's proposal of a spot Ethereum (ETH) exchange-traded fund

February 11, 2024

BlackRock's Proposal for an Ethereum ETF

BlackRock filed for its spot Ethereum ETF, called the iShares Ethereum Trust, on December 11, 2023. Just a day before the initial deadline for the SEC to make the decision, a delay was announced. According to S. Haywood, the assistant secretary of the SEC, it seems acceptable to extend the decision-making process, as stated in the filing of January 24, 2024:

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 and the issues raised therein.

SEC's Decision-Making Process

This delay marks the beginning of a potential series of delays, as SEC can use up to 240 days, since BlackRock's spot Ethereum ETF has a final deadline decision date of August 7, 2024.

The SEC will now face a March 10 deadline to approve, disapprove or initiate additional proceedings on the proposed fund, as per filing mentioned earlier:

[the Commision] 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

Market Speculation and Analysis

However, it is plausible (and quite probable) that these delays might persist until May 23. Much like the SEC's simultaneous approval of all Bitcoin ETF applications on January 10, 2024, there's a chance they could approve all ETH-ETF applications in one go, as the deadlines for final decisions on other spot Ether ETF applications span from May 23 to August 3.James Seyffart, Bloomberg Intelligence ETF research analyst, anticipates occasional delays for spot Ether ETFs in the coming months, and highlights the importance of May as a critical decision-making period for Ethereum ETF applications, as per his post on X:

The cryptocurrency industry and investors are closely monitoring the SEC's decision-making process regarding spot Ether ETFs. The approval of these ETFs would provide a well-regulated and more accessible path for investing in Ethereum for both institutional and retail investors,  granting them access to the world's second-largest cryptocurrency market. It would also signify an enhancement in regulatory standards within the US.

Conclusion: SEC's Uncertain Perspective

The anticipation of approval for a spot-ETH ETF arises after the SEC recently gave the green light to various spot bitcoin ETFs. Yet, SEC Chair Gary Gensler explained that the agency's position on bitcoin ETFs does not imply a broad endorsement of other cryptocurrency products. In a media briefing, Gensler clarified, “As I said two weeks ago, that which we did with regard to bitcoin exchange traded products is cabined to this one commodity non-security and shouldn’t be read to be anything other than that.”

The SEC can sometimes behave in an unpredictable way, which can make forecasting a decision outcome challenging. However, the decision could still be helped by the BTC-ETF precedent.