All Eyes On SEC As Spot Ethereum ETF Issuers Gear Up For March Meeting

The cryptocurrency market is abuzz with anticipation as multiple issuers vie for a spot on the Ethereum ETF landscape. Following the successful launch of spot Bitcoin products, the quest for Ether-based investment vehicles has gained momentum. However, the path ahead is fraught with challenges, as the US Securities and Exchange Commission continues to delay decisions and commissioners express mixed opinions.

SEC And Issuer Meetings: Paving The Way For Dialogue

A report by Reuters disclosed that the SEC is reportedly planning meetings with spot Ethereum ETF applicants next month. These meetings aim to facilitate discussions and address concerns regarding the proposed Ether-based investment vehicles. While the SEC’s public log does not currently indicate any scheduled meetings, sources familiar with the matter have confirmed the plans.

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The SEC has postponed decisions on spot Ether-based products until May at the earliest, casting a shadow of uncertainty over the industry. VanEck’s filing stands as the first in line, with the SEC facing a deadline of May 23 to accept or reject their bid. Other prominent issuers, including BlackRock, Franklin Templeton Grayscale, and Invesco Galaxy, anxiously await the SEC’s response.

Image credit: Shanghaiist

Spot Ethereum ETF Bids: A Surge Of Interest

Last year witnessed a surge of interest in spot Ethereum ETFs, with issuers filing bids shortly after the applications for spot Bitcoin ETFs. The subsequent approval of spot Bitcoin ETFs in January 2023, resulting in the commencement of trading for nearly a dozen funds, fueled optimism within the industry.

However, the path to spot Ethereum ETFs remains arduous, as the SEC grapples with regulatory complexities and concerns surrounding the unique characteristics of Ethereum compared to Bitcoin.

SEC’s Stance On Crypto: A Cautious Approach

SEC Chair Gary Gensler’s critical stance on cryptocurrencies continues to cast a shadow over the approval process for spot Ethereum ETFs. Despite approving spot Bitcoin ETFs, Gensler emphasized their high-risk nature and cautioned against interpreting the decision as a broader endorsement of crypto assets. The unclear security designation of Ethereum, unlike Bitcoin’s non-security commodity status, further complicates the regulatory landscape.

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Ether market cap currently at $392 billion. Chart:

In contrast to the run-up to spot BTC ETF approvals, the SEC has not engaged in open dialogue with issuers regarding spot ETH ETFs. This lack of communication creates an additional hurdle for issuers seeking clarity and guidance on the regulatory requirements.

Gensler’s emphasis on a collective vote by all five commissioners underscores the importance of consensus within the SEC. However, previous decisions do not guarantee sweeping crypto endorsement, leaving issuers uncertain about the SEC’s ultimate stance on spot Ethereum ETFs.

Industry Stakeholders’ Perspective: A Call for Transparency

Prominent crypto industry stakeholders, such as Coinbase, have voiced their support for the approval of Grayscale’s spot ETH ETF application. Coinbase has also petitioned the SEC for more transparent crypto regulations, echoing the industry’s desire for a clear and predictable regulatory framework.

Potential Delay Tactics: A Strategy of Avoidance

James Angel, an associate professor of finance at Georgetown University, suggests that the SEC may employ various tactics to delay the approval process rather than outright rejecting applications. This strategy aims to avoid potential legal challenges that could arise from rejections.

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Market Impact: A Rally Fueled By Anticipation

 ETH price soaring in the weekly timeframe. Source: Coingecko

Amidst the ongoing efforts to secure SEC approval for spot Ether ETFs, the price of ETH has experienced a significant surge, climbing over 40% in the last 30 days. Grayscale experts attribute this rally to the hype surrounding spot ETH ETFs, coupled with anticipation for the Dencun upgrade.

Featured image from Pexels , chart from TradingView

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Author: Christian Encila

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