Ethereum
SEC Signals Possible Approval of Planned Ethereum Spot ETFs
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Securities and Exchange Commission moves closer to approving highly anticipated ‘spot’ Ethereum Exchange Traded Fund This week, FOX Business learned it.
According to sources close to the Commission, the SEC and its Chairman Gary Gensler are drawing on recent court decisions and previous guidance on Ethereum futures ETFs to grant permission to nine issuers to offer products that track the daily price of the second largest cryptocurrency in the world.
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Although approval is not certain, SEC staff have signaled that they are preparing to at least partially greenlight these products as early as Thursday, the deadline for the agency to decide on to approve or not so-called 19b-4 applications filed by the CBOE exchange, requesting the listing of spot Ethereum ETFs from VanEck and Ark Investments in partnership with 21 Shares.
The seal of the United States Securities and Exchange Commission is displayed on a smartphone, with Bitcoin visible on the screen in the background, in this photo taken in Brussels, Belgium, January 9, 2024. (Photo illustration by Jonathan Raa/NurPhoto via Getty Images/Getty Images)
The approval of the 19b-4 applications is the first of a two-part process in which the SEC is also expected to approve issuers’ registration statements, known as S-1s – a process that could take several weeks – meaning the ETFs might not officially launch until later this year.
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U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler testifies before the Senate Banking, Housing, and Urban Affairs Committee during an oversight hearing at the Capitol in Washington, U.S., on September 15, 2022. (Reuters/Evelyn Hockstein / Reuters Photos)
But a blessing from the SEC would be another significant development in the maturation of the $2 trillion crypto industry.
Many had given up hope that the SEC would smile on an Ethereum spot ETF, given the lack of engagement on the applications and the uncertainty surrounding the Commission’s thinking about Ethereum’s status as a possible security.
But on Monday, the SEC began actively engaging with issuers and national exchanges ahead of Thursday’s deadline, which it did before approving eleven ETFs that tracked the daily price of Bitcoin in January.
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The SEC, through a spokesperson, declined to comment.
Potential ETF issuers who spoke on condition of anonymity told FOX Business they were surprised by what appeared to be a sudden change of heart from the agency.
Many in the industry attributed the SEC’s heavy-handed commitment to growing bipartisan support from Congress and former President Trump, who said he would embrace the use of crypto and end the “hostility” regulatory action from the Biden administration towards the industry if elected. .
On Tuesday, the Trump campaign updated its website to accept cryptocurrency donations.
Nonetheless, sources familiar with Gensler’s thinking say he considered other factors such as the court ruling involving crypto asset manager Grayscale and the Commission’s prior green light to Ethereum futures ETFs, which arrived on the market in October.
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Last summer, a federal appeals court rejected the SEC’s decision to deny Grayscale’s petition to convert its GBTC Bitcoin Trust into a cash ETF, saying the agency failed to present compelling arguments that the Bitcoin spot ETF was materially different from the futures ETF that had been trading since. 2021. The Grayscale decision laid the groundwork for the rollout of Bitcoin spot ETFs, and now, perhaps Ethereum spot ETFs as well.
According to issuer filings today, it appears the SEC’s main sticking point for approving an Ethereum spot ETF is so-called “staking,” which allows investors to earn passive income by putting their Ethereum as collateral and getting a return. In an ETF format, this can allow investors to receive higher returns than they could receive with an ETF that only tracks the daily price of Ethereum.
POLAND – 2024/02/04: In this photo illustration a United States Securities and Exchange Commission (SEC) logo seen displayed on a smartphone with stock market percentages in the background. (Photo illustration by Omar Marques/SOPA Images/LightRocket via Getty I (Getty/Getty Images)
This is a bet by which the SEC believes that it could have arguments according to which “Ethereum 2.0”, or Ethereum issued since the merger of the blockchain with a so-called “proof of stake” consensus mechanism in 2022, could be considered a title.
Indeed, if the SEC approves Ethereum ETFs without the staking component on Thursday, this does not negate the fact that Ethereum issued on the current proof-of-stake network can be a security in the eyes of the Commission. FOX Business reported in April that the SEC’s Enforcement Division has been investigating Ethereum, its merger, and companies and individuals associated with it for at least a year.
Although the SEC maintains that outside political factors do not influence it, there is no doubt that crypto has become an increasingly political issue in recent weeks.
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The Biden administration, including Senate Democrats such as Majority Leader Chuck Schumer (D-N.Y.), appears concerned that Republicans and Republican presidential candidate Donald Trump could take advantage of the popularity growing digital assets, especially among younger voters, and using the power of the administration. cracking down on crypto to win votes and take the White House and eventually the Senate.
FILE PHOTO: Representations of the cryptocurrencies Bitcoin, Ethereum and DogeCoin are placed on the PC motherboard in this illustration taken June 29, 2021. (REUTERS/Dado Ruvic/File Photo / Reuters Photos)
Last week, Schumer led a group of twelve Democrats in voting to repeal a controversial SEC rule that would limit crypto companies’ ability to gain fair access to the banking system. The 60-38 vote in favor of repeal was widely seen as a watershed moment for the industry, which until recently was grappling with a Democratic Party that has shown unwavering support for Gensler and his regulatory crackdown on crypto.
On Wednesday, the House is expected to vote on a first-of-its-kind bill that would establish a comprehensive regulatory framework for digital assets, a foundation to provide clarity for crypto companies and investors.