2024-04-27
The Securities and Exchange Commission (SEC) has been a topic of concern for U.S. issuers and firms looking to launch exchange-traded funds (ETFs) tied to the price of ether, the world's second-largest cryptocurrency after bitcoin.
Recent discouraging meetings with the agency have left issuers expecting their applications to be denied, according to sources.
VanEck, ARK Investment Management, and seven other issuers have filed applications with the SEC to list ETFs that track the spot price of ether. However, the recent meetings between these issuers and the agency have been one-sided, with SEC staff not engaging in substantive discussions about the proposed products.
This stands in stark contrast to the detailed conversations that took place prior to the approval of spot bitcoin ETFs in January.
The lack of engagement from the SEC has led participants in the meetings to believe that their filings will be denied.
The rejection of ether ETFs would be a setback for the crypto industry, which had hoped that the approval of spot bitcoin ETFs would pave the way for similar products and drive cryptocurrencies into the mainstream.
The market had anticipated that the approval of ether ETFs would follow a similar trajectory. However, with the SEC's reluctance to engage in meaningful dialogue, the outlook for approval appears uncertain.
The regulatory landscape surrounding cryptocurrencies remains unclear, and the SEC's stance under the leadership of Gary Gensler, a known crypto skeptic, adds to the uncertainty.
Market manipulation concerns have been a primary reason for the rejection of bitcoin ETFs in the past.
However, issuers argue that the approval of bitcoin ETFs and ether futures-based ETFs in October should set a precedent for the spot ether products.
They have attempted to address potential regulatory concerns in their meetings with the SEC, but without substantive feedback from the agency, it is difficult to gauge the likelihood of approval.
Todd Rosenbluth, head of ETF analysis at data firm VettaFi, suggests that approval may be delayed until later in 2024 or even longer, given the current regulatory landscape.
The lack of clarity from the SEC has resulted in downward pressure on ether's price, with investors factoring in the expected denial of ETF applications.
The crypto industry will need to navigate this uncertainty and adjust its expectations accordingly.
