SEC Likely to Reject Spot Ether ETF Applications, Issuers Remain Optimistic
The US Securities and Exchange Commission (SEC) is gearing up to reject applications for spot ether exchange-traded funds (ETF), signaling a potential setback for the cryptocurrency market. Recent in-house meetings have indicated a bleak future for the proposed offerings, with the SEC expected to withhold approval for spot ETFs linked to Ethereum, the second-largest cryptocurrency.
According to a report by Reuters, the SEC is likely to decide against applications from issuers such as VanEck and Ark at the end of May. Preliminary discussions between the regulator and issuers have reportedly not delved into substantive details about the internal workings of the ETFs, leading to concerns among market participants.
While issuers argue that the market is ready for a spot ETF based on the success of ether futures-based ETFs approved in 2023, the SEC has not raised specific concerns or asked probing questions during the discussions. This contrasts with the regulator’s active stance leading up to the approval of spot bitcoin ETFs earlier this year.
Market participants had hoped that Ethereum would be the next cryptocurrency to receive approval for a spot ETF, but the SEC’s approach has left many skeptical about the timeline for such a decision. Todd Rosenbluth, an executive at analytics firm Vettafi, believes that approval may be delayed until later in 2024 or beyond, citing a cloudy regulatory picture.
While some issuers remain optimistic about their applications, others, like VanEck CEO Jan van Eck, have expressed concerns about potential rejection by the SEC. The regulator still has to review applications from seven other issuers, including 21Shares, Fidelity, BlackRock, and Grayscale.
One potential reason for a denial could be the SEC’s need for more time to assess market surveillance mechanisms before approving spot ETFs for ether. Experts suggest that the regulator may be seeking additional statistical data on the products to make an informed decision. However, there are fears that an issuer could challenge the SEC in court, similar to Grayscale’s actions leading up to the approval of bitcoin spot ETFs.
Overall, the future of spot ether ETFs remains uncertain as the SEC continues to evaluate applications and market conditions. Market participants are closely watching the developments, hoping for clarity on the regulatory landscape for cryptocurrency ETFs.
