SEC Likely to Deny Ether ETFs Amidst Ongoing Regulatory Challenges

The United States Securities and Exchange Commission (SEC) appears poised to deny the approval of spot Ether ETFs in May, casting a shadow over the cryptocurrency landscape in the U.S.

by Faruk Imamovic
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SEC Likely to Deny Ether ETFs Amidst Ongoing Regulatory Challenges
© Getty Images/Jack Taylor

The United States Securities and Exchange Commission (SEC) appears poised to deny the approval of spot Ether ETFs in May, casting a shadow over the cryptocurrency landscape in the U.S. This decision comes amid a backdrop of a generally hesitant approach towards cryptocurrency regulations by the agency.

Regulatory Hesitance

According to a recent report by Reuters on April 24, U.S. issuers and other firms are bracing for the SEC to reject spot Ether ETF applications in the coming month. This anticipation follows a series of meetings with the regulator, which participants described as one-sided, with little substantive discussion on the proposed products.

Four individuals familiar with these meetings, who preferred to remain anonymous due to the private nature of the discussions, highlighted the contrast between these recent interactions and the more detailed discussions that occurred in January, just before the SEC approved spot Bitcoin ETFs.

This potential denial continues a longstanding trend where the SEC has shown reticence towards approving cryptocurrency-based products. Before its historic approval of Bitcoin ETFs, the agency had consistently rejected such filings for over a decade, only altering its stance following a court victory by Grayscale Investments against the SEC in August 2023.

Lingering Uncertainty

The regulatory landscape for Ether ETFs remains murky. Todd Rosenbluth, a senior ETF analyst at VettaFi, commented, "It seems more likely that approval will be delayed until later in 2024, or longer," indicating the persistent uncertainty clouding the sector.

Bloomberg ETF analyst Eric Balchunas provided an estimation in March, rating the chances of the SEC approving a spot Ether ETF in May at about 35%. Balchunas also suggested that the SEC's silent treatment towards prospective fund issuers might be a deliberate strategy.

Adding to the complexity, SEC Chair Gary Gensler's unclear stance on whether Ether is considered a security has further complicated the approval process. His reluctance to provide clarity has significant implications for the regulatory approach to Ether and other cryptocurrencies.

Global Advances Despite U.S. Delays

While the U.S. grapples with regulatory hesitations, other global jurisdictions are advancing their cryptocurrency frameworks. Notably, Hong Kong’s Securities and Futures Commission (SFC) has taken significant steps forward.

On April 24, the SFC officially approved the first batch of spot Bitcoin and Ether ETFs, encompassing three BTC and three ETH ETFs managed by China Asset Management, Harvest Global Investments, and Bosera.

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