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On April 25th, it was reported that the U.S. SEC is expected to reject Ethereum spot ETF applications next month. According to four sources familiar with the matter, after meetings with the U.S. Securities and Exchange Commission (SEC) in recent weeks, U.S. issuers and other companies anticipate the SEC will reject their applications to launch Ethereum spot ETFs linked to Ethereum prices.
VanEck, ARK Investment Management, and seven other issuers have submitted applications to the SEC for listed ETFs tracking the spot prices of the world's second-largest cryptocurrency, Ethereum, only behind Bitcoin. The SEC must decide on VanEck and ARK's applications by May 23rd and May 24th, respectively, with these two companies' applications taking precedence.
The meetings between issuers and the SEC were described by the four sources as one-sided, with the agency's staff not discussing substantive details of the proposed products.
The sources, who declined to be identified because the discussions were private, stated that the issuers argued during the meetings that these ETFs, along with Ethereum futures-based ETFs approved by the SEC in October, set a precedent for spot Ethereum products and attempted to address potential regulatory concerns. They added that SEC staff listened to their views but did not articulate specific concerns or raise general questions, indicating that the agency would reject these applications.
This would be a setback for the cryptocurrency industry, which had hoped that spot Bitcoin ETFs would pave the way for similar products and mainstream adoption of cryptocurrencies.
Todd Rosenbluth, director of ETF analysis at data firm VettaFi, stated: "It looks like approval is likely to be pushed to later in 2024, or longer, and I'm closely monitoring the situation. The regulatory situation still seems unclear."
Some issuers indicated they still plan to submit additional disclosure documents to the SEC to continue the dialogue.
An SEC spokesperson stated that the Commission does not comment on individual applications. Jan van Eck, CEO of VanEck, told CNBC earlier this month that the company's application is "likely to be rejected."
ARK did not respond to requests for comment. During an event this week, ARK CEO Cathie Wood said Ethereum could become a major asset class.
Hong Fang, CEO of cryptocurrency exchange OKX, stated that the price of Ethereum reflects anticipated depreciation. While cryptocurrencies have risen by 39% this year, Ethereum has struggled to keep up with Bitcoin's pace, which has risen by over 51% and hit a new high last month. Fang said that as people establish this expectation, downward pressure on the price will increase.
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According to sources and records from the SEC, the SEC has held only a few meetings on Ethereum products to date.
The only meeting disclosed by regulatory authorities was last month with cryptocurrency exchange Coinbase. The meeting pertained to Grayscale's application to convert its Ethereum Trust into an ETF, with Coinbase serving as the trust's custodian.
The SEC approved spot Bitcoin ETFs based on the existing market surveillance mechanisms of Bitcoin futures ETFs approved in 2021. Coinbase believes the same reasoning applies to spot Ethereum products because, according to the SEC's disclosure, Ethereum futures and spot markets are highly correlated.
If the SEC does reject Ethereum ETFs, some applicants expect it will be due to broad issues such as the nature and depth of underlying Ethereum market statistics.
Matt Hougan, Chief Investment Officer of Bitwise Asset Management, said the company has applied for an Ethereum spot ETF and the agency may feel it has limited time to observe Ethereum futures.
"I think it will be for mechanical reasons that it gets pushed out because they just want to see more data," Hougan said.
Some industry insiders suggest that a rejection could lead to another lawsuit. "We could very well end up seeing Ethereum ETFs eventually," said one source. "But not until someone gets rejected and goes to court." |
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Post time 5-5-2024 20:31:53