The discourse surrounding the potential approval of Ethereum ETFs has intensified following the SEC’s recent request for exchanges to expedite their 19B-4 filings for these ETFs. Bloomberg analyst Eric Balchunas, in collaboration with colleague James Seyffart, has revised their estimated approval odds from a meager 25% to a more optimistic 75%. This adjustment reflects a perceived shift in the SEC’s approach to cryptocurrency regulation, driven by political influences and recent developments within the agency.
The SEC is facing a crucial deadline this week, as it must make decisions regarding both the 19b-4 filings and the S-1 registration statements. The 19b-4 filings concern changes in exchange rules necessary for the listing of new products like Ethereum ETFs, while the S-1 registration statements provide detailed information about the structure, management, and strategy of the ETFs in replicating Ethereum’s performance. While the SEC has the option to approve the 19b-4s, they may choose to delay the S-1s.
The SEC’s review process involves multiple stages. Initially, the SEC evaluates the 19b-4 filings from exchanges such as NYSE or Nasdaq, which seek permission to list the new Ethereum ETFs. Approval of these filings is crucial as it allows the ETFs to be added to trading platforms.
However, the actual sale of these ETFs to the public hinges on the approval of the S-1 registration statements. These documents are essential as they provide potential investors and the SEC with comprehensive details about the financial and operational aspects of these crypto products. Despite the possibility of approving the 19b-4s, the SEC may choose to slow down the approval process for the S-1s. This delay tactic, possibly due to the perceived risks associated with cryptocurrency products, grants the SEC more time to assess market conditions and the specific structures of these ETFs.
Such delays are not uncommon, as the SEC has consistently expressed concerns about the stability and security of investments in cryptocurrencies. The approval of Ethereum ETFs could potentially trigger the highly-anticipated bull run in 2024. On the other hand, any postponement or rejection could impact market perceptions and investor confidence, potentially allowing bears to regain control, albeit temporarily.
In recent months leading up to May, the SEC has taken a cautious approach, postponing decisions and extending review periods for several Ether ETF applications. Notably, the review of Franklin Templeton’s application has been delayed until June 11, while decisions on applications from Invesco and Galaxy were also deferred. Additionally, the review period for BlackRock’s application was extended, indicating a pattern of thorough scrutiny. The upcoming deadlines for proposals from VanEck and Grayscale later this month are of particular significance, with the investment community closely monitoring the outcomes.
Meanwhile, Grayscale Investments has chosen to withdraw its application for an Ethereum-based spot ETF. Former CEO Michael Sonnenshein announced that the company will instead focus on converting its Ethereum trust into spot exchange-traded products.