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SEC likely to deny new Ether ETFs this week

Published 20/05/2024, 15:18
ETH/USD
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As the anticipation builds among cryptocurrency investors and financial institutions, the U.S. Securities and Exchange Commission (SEC) is expected to deliver a significant decision this week that could impact the future of Ethereum exchange-traded funds (ETFs).

Despite the recent success of spot bitcoin ETFs issued by financial giants such as BlackRock (NYSE:BLK), Fidelity, and VanEck, the suggestion is that the regulatory body is unlikely to approve similar products for ether at this stage.

Cryptocurrency Regulation: SEC Stance on Ether

In a recent interview with CNBC, SEC Chair Gary Gensler said that while crypto is a small piece of the overall markets that the SEC oversees, it is “an outsized piece of the scams and frauds and problems in our markets because without prejudging any one token, much of this field is noncompliant with the protections of our securities laws.”

When asked by the host whether Ethereum is a commodity or a security and whether one day there will be an ETF, Gensler was non-committal, stating that the fundamental question is “How do we ensure that the American investor is protected?”

“Right now, they’re not getting the required or needed disclosures,” he added. “The intermediaries in the center of this rather centralized market generally are conflicted and doing things we would never allow the New York Stock Exchange to do.”

Again, when questioned about a potential Ethereum ETF, Gensler kept his cards close to his chest, saying that “those filings will take up at the appropriate time.”

Overall, Gensler’s vote is seen as pivotal in potentially approving Ethereum ETFs. However, some companies that issued spot bitcoin ETFs are not optimistic the SEC will do the same for ether, according to a CNBC report. VanEck CEO Jan van Eck told CNBC that they were first to file for Ethereum in the U.S., and they believe they will “probably be rejected.”

Elsewhere, speaking to Investing.com, Roshan Shah, Co-founder and CEO of Decimal Digital Currency, said Bitcoin ETFs “only exist today because their approval was effectively forced by the courts in the Grayscale conversion decision in August 2023” and that “no such precedent or ruling exists for Ether.”

“The markets are only just beginning to understand Bitcoin, and a position in Ether is far more complex,” stated Shah. “The SEC wants to keep people's pensions, 401ks, and retirement accounts away from that for as long as possible.”

He believes regulators are also wary of a slippery slope, which started with Bitcoin ETFs because Ethereum ETFs “could open the door for many other digital assets to access public markets.”

“Protecting precedent is critical to the SEC because their argument for rejecting crypto assets in an ETF becomes weaker with each ETF they do approve,” Shah adds. “We expect the SEC to perpetually delay Ether ETFs, perhaps even until or unless forced to approve by courts, like with Bitcoin.”

Meanwhile, Charles d'Haussy, CEO of dYdX Foundation, told Investing.com that he would be surprised if the SEC said yes at this stage despite his optimistic view about the future approval of a spot Ethereum ETF.

“Ethereum ETFs may mirror the path taken with Bitcoin ETFs. Since futures-based Ethereum ETFs have already been approved, if the SEC denies approval for spot Ethereum ETFs, it is likely to face legal challenges and eventually lose, similar to what happened with Bitcoin ETFs,” d'Haussy told us.

“Ethereum ETFs may be less profitable than directly holding Ether (ETH) due to the absence of staking reward distributions."

Why Is Ethereum Going Up?

Ethereum has risen around 3.8% in the last seven days of trading after a dip between mid-March and mid-May.

Even so, after a rally between October 2023 and March 20204, the cryptocurrency is still on a strong footing, climbing over 35% this year and more than 69% over the past 12 months as the general crypto market surged, of course, led by Bitcoin, and investors had been anticipating potential Ethereum ETFs.

Find the Best Crypto ETFs

While Ethereum looks increasingly likely to be left by the wayside when it comes to ETFs, investors can still explore the top cryptocurrency Exchange Traded Funds (ETFs) to maximize portfolio potential. Dive into our comprehensive list of the top Bitcoin Crypto ETFs, carefully curated to provide you with diversified exposure to this exciting asset class, without the complexities of physical ownership

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