It’s no surprise that the U.S. Securities and Exchange Commission (SEC) is not keen on Ethereum exchange-traded funds (ETFs). On January 24, the SEC postponed its decision on BlackRock’s Ethereum ETF application filed in November.
As expected, the postponement
The SEC stated that the reason for the postponement was that “the Commission will establish a longer period for taking action on the proposed rule change to allow sufficient time to consider the proposed rule change and the issues raised therein.” “I judged it to be appropriate,” he said. The SEC used much the same language last week when it deferred a decision on Fidelity’s Ethereum ETF application.
This is what most market analysts expected. In a recent report, JPMorgan analysts put the probability of the SEC approving an Ethereum ETF by May at less than 50%. James Seyffart, a veteran ETF expert at Bloomberg, said delays in Ethereum spot ETF applications will “continue to occur sporadically” in the coming months.
SEC Commissioner Pierce cited Gensler’s harsh public statements after approving the Bitcoin ETF, saying that the SEC is pushing investors away from in-demand products and “putting retail investors in a position to get their hands on Bitcoin.” “We have squandered a decade of opportunity to do our work” in a long period of unnecessary but serious turmoil that has forced us to resort to inefficient methods.” .
Commissioner Peirce now believes that the SEC and Chairman Gensler have learned this lesson and are not willing to move the “goalposts” (such as changing pre-determined terms and conditions later), as they did with Bitcoin ETF applicants. However, he is hesitant to predict what will happen with any “specific” crypto product.
In an interview with Coinage, Peirce said preparing an ETF for market requires “a lot of work” and that “facts and circumstances” are important.
Impact of ongoing litigation
Bitcoin is the only crypto asset classified as a commodity by regulators, which placed it in a favorable position for approval. Unlike previous regulators who said Ethereum is “well decentralized,” Chairman Gensler has expressed concerns about Ethereum, especially after it transitions to a staking mechanism.
“The SEC continues to pursue lawsuits against crypto exchanges that offer staking services for proof-of-stake (PoS) blockchains, including Ethereum, and at least until these lawsuits are resolved, Ethereum spot ETF approval is unlikely. It becomes more difficult,” said Nikolaos Panigirtzoglou, an analyst at JPMorgan.
Panigirtzoglou, on the other hand, is among the lawsuits filed by the SEC against cryptocurrency exchanges Kraken, Coinbase, and Binance for allegedly violating securities laws. The SEC also points out that the SEC may classify Ethereum as a commodity, as it does not directly mention Ethereum.
Furthermore, if the SEC were to take issue with Ethereum ETFs, it could also compete with a rival regulator, the Commodity Futures Trading Commission (CFTC), which claims jurisdiction over Ethereum.
Taken together, it seems that the emergence of Ethereum ETFs is inevitable, but there are still many hurdles to overcome.
Will it turn out to be good in the end?
The SEC’s delayed decision prevents American consumers from accessing a secure, tax-advantaged way to gain exposure to the second-largest cryptocurrency by market capitalization, but ultimately This could work in Ethereum’s favor.
Commissioner Peirce has repeatedly stated that by objecting to Bitcoin ETFs, the SEC indirectly created “artificial enthusiasm” around Bitcoin ETFs and induced demand.
“Congress has not given us the power to dictate whether or not a particular investment is right for the people,” Peirce said. “But we have abused the administrative process to make investments we don’t like. “We have kept it away from the public,” he said.
｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Image: SEC Chairman Gary Gensler (Jesse Hamilton/CoinDesk, edited)
｜Original text: ETH ETFs Are Inevitable — But When?