- Following the success of Spot Bitcoin ETFs, expectations were high for Ethereum ETFs, but the SEC is likely to reject these due to discouraging feedback.
- Regulatory silence and a lack of specific feedback during meetings indicate probable denial.
- Analysts and industry leaders anticipate continued delays with potential court challenges influencing final decisions.
After Spot Bitcoin ETFs had been approved by the US Securities and Exchange Commission (SEC) in January – and created enormous investor interest and cash inflows – hopes had been high for Spot Ethereum ETFs to follow suit.
However, as Reuters reports four people close to the matter said they believed the SEC is going to deny the applications based on ‘discouraging meetings’ in the past weeks.
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And, Bloomberg analysts had downgraded possibilities for an approval of these ETFs amid a lack of communication by the watchdog. They said regulatory silence is a negative sign, even as the SEC asked for public comments. This was brushed off by Bloomberg analyst James Seyffart as ‘standard procedure’.
Jan Van Eck, CEO of asset manager VanEck, agreed with that sentiment, telling CNBC during the Paris Blockchain Week that he believed the ETF applications would be denied. He said the usual process was comments on an application by regulators which happened with the Bitcoin ETFs, but not with the Ether ETFs:
And right now, pins are dropping as far as Ethereum is concerned.
Jan Van Eck, VanEck CEOSources Say No Substantive Details Discussed
The SEC has had limited meetings about Ether ETF products, notably with Coinbase concerning Grayscale’s application to convert its Ethereum Trust into an ETF.
While the SEC previously approved Bitcoin spot ETFs based on existing surveillance mechanisms from Bitcoin futures, similar arguments were presented for Ether products.
However, the lack of specific feedback from the SEC during these discussions suggests a possible rejection of the Ether ETF applications, likely due to concerns about the underlying market’s data and nature.
Court May Have Last Say
VettaFi head of ETF analysis, Todd Rosenbluth, believes it is likely that applications will be delayed ‘until later in 2024, or longer’.
Hong Fang, president of crypto exchange OKX, said the price of ETH was suffering due to now likely denial of these ETF applications, which investors had already priced in:
There’s more downward pressure on prices as people build that expectation in.
Hong Fang, president of crypto exchange OKXIn reference to Future Ethereum ETFs, Matt Hougan, Bitwise Asset Management chief investment officer said the agency might argue a lack of data and time to observe these funds:
I think that would be the mechanical reason why it would get pushed out is they just want to see more data.
Matt Hougan, Bitwise Asset Management chief investment officerGet the most important crypto news delivered to your inbox by subscribing to the CNA newsletter
One of the sources told Reuters they didn’t expect an approval until an applicant takes the SEC to court – much like what happened with Bitcoin, after a decade-long fight.
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