SEC Calls for Public Comments on BlackRock’s Revised Ethereum ETF Proposal

The U.S. Securities and Exchange Commission (SEC) has set the stage for a potential shift in the cryptocurrency ETF landscape with its call for public comments on the recent amendments to BlackRock’s proposed spot Ethereum exchange-traded fund (ETF). This move comes after Nasdaq submitted a revised proposal on April 19 to ensure compliance with regulatory expectations.

The iShares Ethereum Trust, the ETF in question, is designed to track the performance of Ethereum’s price and has been in development since November 2023. The latest amendment to the proposal introduces a significant change by transitioning from direct exchanges with Ethereum to a cash transactions model. The SEC has allotted 21 days for stakeholders and the public to provide feedback on these modifications, which will play a crucial role in the regulatory review process and the final decision.

The revised structure of BlackRock’s Ethereum ETF now features a cash redemption model, aligning it with the approach used for approved spot Bitcoin ETFs. This shift towards financial transactions over physical exchanges reflects a strategic adjustment to meet regulatory standards. Additionally, the absence of a staking provision in the revised proposal sets BlackRock apart from other firms like Fidelity and Grayscale, indicating a cautious approach to secure regulatory approval.

Despite efforts by major financial entities to revise their ETF proposals, market analysts are growing increasingly skeptical about the near-term approval of Ethereum ETFs. Bloomberg’s ETF analyst Eric Balchunas has lowered the probability of approval by May from 70% to 25%, while Standard Chartered now views the likelihood of SEC approval in May as low. The lack of constructive dialogue between the SEC and ETF applicants, as seen with Bitcoin ETFs, has contributed to this shift in sentiment.

The SEC’s deliberate approach to cryptocurrency-inspired financial products is evident in the delay of decisions on other ETF proposals, such as those from Franklin Templeton and Grayscale. The extension of the timeline for public feedback underscores the importance of stakeholder input in shaping the regulatory environment for Ethereum and other cryptocurrency ETFs. As the industry awaits further developments, the outcome of the public comments on BlackRock’s amended proposal will be closely watched for insights into the future of cryptocurrency ETFs in the U.S.