The SEC could approve a spot Ethereum ETF as early as this week, marking a significant shift in regulatory stance. Bloomberg analysts Eric Balchunas and James Seyffart have increased their odds of approval to 75%, up from 25%, citing recent chatter and the SEC’s request for revised 19b-4 filings by 10 am Tuesday. This rapid development has led to a scramble among applicants, including major players like BlackRock, Grayscale, and Fidelity.
BlackRock, the world’s largest asset manager, has a strong track record with the SEC, having only one ETF application denied in 2014. That ETF, the BlackRock Total Return ETF, was initially rejected due to concerns over transparency and alignment with its net asset value (NAV). However, an updated version of this ETF, addressing the SEC’s concerns, went live in December 2023, just a month before the approval of Bitcoin ETFs. This history emphasizes BlackRock’s ability to navigate regulatory challenges successfully.
The SEC’s decision on Ethereum ETFs has been eagerly anticipated, with deadlines for various applications approaching. Data from Bloomberg Terminal shared by James Seyffart lists the ETFs awaiting approval, including those from VanEck, ARK 21Shares, Hashdex, Grayscale, Invesco Galaxy, Fidelity, Franklin, and Bitwise. These applications have faced multiple delays, but the recent push for revised filings suggests a potential breakthrough.
Grayscale and BlackRock have been proactive in updating their applications. Grayscale filed an S-3 registration statement to convert its existing Ethereum Trust to a spot ETF and an S-1 for a mini Ethereum ETF. BlackRock’s Nasdaq amendment to its 19b-4 filing proposes cash-based creation and redemptions, aligning with other Ethereum ETF applications and previously approved Bitcoin ETFs.
The SEC’s cautious approach has been influenced by concerns over market manipulation and the need for comprehensive market data on Ethereum. However, the approval of spot Bitcoin ETFs earlier this year, following a court victory by Grayscale, and the launch of spot Ethereum ETFs in Hong Kong, has raised hopes for similar products for Ethereum. The SEC’s recent interactions with ETF issuers have been described as one-sided, with agency staff withholding substantive comments, leading to speculation about potential rejections.
Despite these challenges, the crypto community remains optimistic, with Ethereum rising 17% in the past 24 hours. The approval of a spot Ethereum ETF would provide a regulated and accessible way for investors to gain exposure to Ethereum, potentially increasing market liquidity and stability. The involvement of prominent asset managers like BlackRock and Fidelity adds credibility to these products, which could attract institutional investors and drive further adoption of cryptocurrencies.
While not guaranteed, BlackRock’s storied history of overcoming regulatory hurdles and having products approved suggests the odds are in their favor this week. An Ethereum ETF greenlight would mark a new era for crypto’s mainstream integration.
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