Leading Bank Anticipates Delays in Approving Ethereum ETFs

10 months ago 5

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Investment bank TD Cowen expects the US Securities Commission (SEC) to delay deciding whether to approve Ethereum (ETH) exchange-traded funds (ETFs). It expects the SEC to observe the functioning of Bitcoin spot ETFs before a potential Ethereum ETF gets the green light.

While the bank doesn’t expect the SEC to wait 26 months, it predicts the Commission will not rule on applications by the May deadline. Approval could come after the 2024 US elections in November.

Why the SEC Could Push ETF Approvals to 2024

The SEC may continue a trend it started in the approval process for Bitcoin ETF applications. It delayed a decision about ARK Invest’s and 21 Shares’ application until the last legally allowed date.

The agency has delayed decisions on Ethereum ETF applications by Grayscale Investments and VanEck. VanEck applied to launch a spot Ethereum ETF in 2021. Other applicants include Distributed Capital, Hashdex, and BlackRock.

The SEC’s previous ETF delays were partly due to its requirements for additional disclosures. Applicants had to disclose who they nominated to redeem and buy shares in their ETFs and measures to combat market manipulation. In November, the SEC asked Fidelity for more information about its Ethereum application.

Market manipulation can be carried out in many ways. Those who want to manipulate an asset’s price can spread fake news or make large transactions to cause significant price swings for their own benefit.

The SEC Won’t Use ETH’s Security Status

The SEC has not taken an official legal stance on Ethereum’s status, which could delay an ETF approval. Last year, it sued crypto exchange Kraken for offering its Ethereum staking service as an unregistered security. However, it has not taken an official legal position on whether Ethereum itself is a security.

Read more: How To Stake Ethereum (ETH)

As a result, Preston Byrne, a Partner at Brown Rudnick, doesn’t expect the SEC to oppose an Ethereum ETF based on Ethereum’s security status. He expects ETF lawyers to point out that the SEC’s lawsuit against Ethereum’s first decentralized organization regarding an alleged 2014 securities sale cannot be cited as a valid reason for denial.

“Ethereum’s possible status as an unregistered security is a minority view, especially given the fact that the Ethereum Foundation’s 2014 sale of Ether is now well past the statute of limitations. I would expect diligent lawyering to address the point in required statutory investor disclosures, but would not expect too much more regulatory interference beyond that.”

Bloomberg senior ETF analyst Eric Balchunas has pegged the odds of an Ethereum ETF approval in May at 70%. His colleague, James Seyffart, said on social media,

“The Spot Ethereum ETF Race is officially on. It’s early but I’d estimate a final deadline on these applications to be around ~May 23, 2024.”

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