Ethereum ETF Is Inevitable But When

It's no surprise that the U.S. Securities and Exchange Commission (SEC) hasn't jumped on the ETH exchange-traded fund (ETF) bandwagon. Yesterday, the agency objected to BlackRock's proposed ETH ETF, which was first filed in November, a few months after the asset manager unexpectedly decided to try launching a spot Bitcoin ETF.

“The Commission finds it appropriate to specify a longer period to allow sufficient time to consider the proposed rule change and the issues raised therein,” according to the SEC report.

This was the decision predicted by most market analysts. In a recent report, JP Morgan (JPM) analyst put the odds of the SEC approving an ETH ETF in May at no more than 50%. Seasoned ETF expert James Seyffart of Bloomberg said delays to spot ETH ETF offerings will likely “continue to be sporadic” over the next few months.

So what exactly needs to happen for an ETH ETF to hit the market? The situation seems even easier than in the case of Bitcoin ETFs, which recently went live after multiple delays by the SEC. For years, the SEC has been hesitant to approve Bitcoin funds because of concerns about the risk of market manipulation.

BlackRock, the world's leading ETF issuer and largest asset manager, was the first to devise an exchange monitoring protocol to allay those concerns, and 11 ETF issuers have also come forward. some major concessions to regulators such as payments in cash, instead of Bitcoin pending approval.

Ultimately, however, Grayscale's court victory forced SEC Chairman Gary Gensler to approve Bitcoin-based financial products. An appeals judge criticized the agency's crooked logic in previously approving Futures ETFs but not spot-based funds and ordered the agency to reassess its listing standards.

Therefore, it could be a good sign that ETH Futures ETFs are already live. However, in his public announcement, Gensler said the decision to approve a Bitcoin ETF “is not a signal that the Commission is willing to approve listing standards for crypto securities.

SEC Commissioner Hester Peirce, the United States' most crypto-friendly regulator, said recently that the SEC does not want to go to court over the ETH ETF and said it will “apply precedent” when making its decision. me. Peirce made public statements criticizing many of the agency's legal challenges to crypto companies and projects.

In a scathing public statement following Gensler's Bitcoin ETF announcement, Peirce said the agency "squandered a decade of opportunities to do our work" in an "unnecessary story". but the consequences” have left investors unable to access in-demand products and “have pushed retail investors to less efficient means of acquiring Bitcoin.

Although Peirce now suggests the SEC and Gensler have internalized the lesson and therefore will not change the “rules” like what happened to the Bitcoin ETF applicants, Peirce remains hesitant to “project guess what will happen to any” particular cryptocurrency product. In an interview with Coinage, Peirce noted it takes “a lot of work” to get ETFs ready for market and that “facts and context” are important.

Peirce said:
“Congress does not authorize us to tell people whether a particular investment is right for them.

” Bitcoin is in a better position to be approved because Bitcoin is the only asset class uniformly classified as a commodity by cryptocurrency regulators. Breaking with previous regulators' stance that Ethereum was “decentralized enough,” Gensler raised concerns about ETH, especially after the network switched to a staking mechanism.
JP Morgan analyst Nikolaos Panigirtzoglou wrote:

“Ongoing lawsuits between the SEC and exchanges that provide staking services for PoS blockchains including Ethereum make spot ETH ETF approval more difficult at least until these lawsuits are resolved. handle".

Panigirtzoglou also noted the SEC did not directly mention ETH in its lawsuits with exchanges Kraken, Coinbase or Binance over alleged securities law violations, suggesting they may indeed classify the cryptocurrency as a type of commodity. Furthermore, if the SEC opens the fight over the ETH ETF, it may have to contend with the US Commodity Futures Trading Commission, a rival regulator that has also claimed jurisdiction over ETH.
All of this together shows that an ETH ETF is inevitable, however there are still many obstacles ahead.

While the SEC's delayed action here is denying U.S. users a safe, tax-advantaged way to gain exposure to the second-largest cryptocurrency, it could ultimately benefit ETH. Peirce said multiple times, by challenging Bitcoin ETFs, the SEC was indirectly creating demand by creating an “artificial craze” around the products.

Peirce said:
“Congress does not authorize us to tell people whether a particular investment is right for them, but we have abused red tape to withhold investments that we do not prefer