SEC Postpones Decision on Approval for Grayscale’s Spot Ethereum ETF

Jimmy Aki
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The United States Securities and Exchange Commission (SEC) has delayed issuing a decision on an application by crypto asset manager Grayscale Investments to convert its Ethereum trust product into a spot exchange-traded fund (ETF) by an additional 35 days.

Suspense Soars as SEC Greenlight Stalls

The cryptocurrency community had been eagerly anticipating the SEC’s decision on Grayscale’s ambitious plan to convert its Ethereum trust into a spot ETF. However, the SEC has unexpectedly delayed the decision, causing a mix of anticipation and frustration in the markets.

In a notice dated January 25, the SEC expressed the need for additional time in its decision-making process to ensure alignment with securities laws.

Highlighting the rationale behind the extension, the agency clarified that it enables in-depth analysis and opens the proposed investment vehicle to public comments. As a result, the decision deadline has been extended by 35 days upon Federal Register publication.

In October 2023, the asset manager submitted its initial filing to the SEC, seeking approval to transform shares of the Grayscale Ethereum Trust into a spot Ether ETF. This strategic move positioned Grayscale among asset managers anticipating a regulatory decision.

While Grayscale’s Ether ETF aims to provide investors with a sophisticated way to engage with Ethereum without the complexities of direct ownership, the recent SEC notice has temporarily halted this initiative.

Before the recent postponement, the regulatory body had approved 11 spot Bitcoin ETF applications, including Grayscale’s GBTC. This approval marked a significant moment for the crypto industry, sparking enthusiasm and elevating expectations for increased collaboration between traditional finance and the crypto sector.

Furthermore, the regulatory approval triggered widespread gains in cryptocurrency tokens and associated industry stocks. Over the last six months, Bitcoin saw a surge of approximately 36%, while Ether, the second-largest cryptocurrency, recorded a gain of about 19%. However, Ether experienced marginal trading losses on Thursday.

SEC Requests for Written Comments to Facilitate Verdict in 35 Days

According to the latest notice, the SEC actively invites input from concerned parties through written submissions regarding Grayscale’s Ether spot ETF proposal. The regulatory body is interested in receiving perspectives, data, and arguments related to the proposal.

Specifically, the Commission is keen on assessing whether the proposed rule change is in accordance with Section 6(b)(5) of the Act or any other relevant provisions, along with the associated rules and regulations.

While there may not be an apparent need for oral presentations, the regulator is willing to consider any requests, under rule 19b4, for an opportunity to make such presentations.

Rule 19b-4 under the Securities Exchange Act of 1934 provides a framework for self-regulatory organizations (SROs) and exchanges to file and process proposed rule changes. It also addresses considerations related to public notice, comment periods, and the SEC’s authority to approve or disapprove proposed rule changes.

SEC Pushes Back on BlackRock and Other Ether ETF Applications

In a related development, the SEC has opted to extend the review period for BlackRock’s proposed spot Ether ETF. This announcement came just a day before the initial deadline scheduled for January 25.

The decision, communicated in a filing by Sherry Haywood, the SEC’s assistant secretary, aims to provide the regulatory body with additional time for a comprehensive assessment of the proposed rule change. This extension introduces the possibility of subsequent delays within a 240-day timeframe.

While the SEC must decide on BlackRock’s spot Ether ETF by August 7, analysts, including Bloomberg ETF analyst Eric Balchunas, predict a collective decision on all pending Ether ETFs in May.

Notably, VanEck and Ark 21Shares’ Ether ETF applications await final decisions on May 23 and May 24, respectively.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.