The U.S. Securities and Exchange Commission (SEC) has announced a delay in its decision regarding Franklin Templeton’s proposed spot Ethereum ETF, extending the deadline to June 11, 2024. The proposed ETF seeks to track the price of ether and would utilize Coinbase Custody Trust Company and the Bank of New York Mellon as custodians. The SEC’s decision to extend the review period is due to the need for additional time to thoroughly evaluate the proposed rule changes and the complex issues surrounding the classification of Ethereum and its suitability for a spot ETF. This cautious approach mirrors a similar delay for Grayscale’s Ethereum Trust proposal, which seeks to convert into a spot ether ETF.
Amidst a surge in applications for spot cryptocurrency ETFs, with industry giants like Fidelity and BlackRock joining the race, there was initial speculation that the SEC would reach a decision in May. However, the recent delays have tempered expectations. Analysts like Bloomberg’s James Seyffart and Eric Balchunas have expressed skepticism and revised their approval likelihood estimates due to the growing uncertainty surrounding spot Ethereum ETFs. Despite regulatory hurdles and dimmed expectations, the market’s appetite for cryptocurrency investment vehicles remains strong, as evidenced by the substantial influx of capital into spot Bitcoin ETFs following SEC approval in January 2024.
Adding to the complexity surrounding spot Ethereum ETFs, the SEC has initiated a period of public comment regarding potential approval. The commission is seeking feedback on proposals from Bitwise Ethereum Trust, Fidelity Ethereum Fund, and Grayscale Ethereum. However, SEC Chair Gary Gensler cautioned against interpreting the approval of spot Bitcoin ETFs as endorsing crypto assets or their regulatory status. Industry figures like VanEck CEO Jan van Eck and CoinShares CEO Jean-Marie Mognetti have voiced skepticism about the approval prospects for spot Ethereum ETFs, predicting a prolonged period of inaction from the SEC on pending applications.
Democratic Senators Laphonza Butler and Jack Reed have urged SEC Chair Gensler to exercise caution in approving crypto-based ETFs, citing potential risks to investors and concerns about inadequate regulatory safeguards. The uncertainty surrounding the approval of spot Ethereum ETFs reflects a broader trend in the regulatory landscape for cryptocurrency investment products. Market participants are closely watching developments in this space, as the outcome will have implications for investor access to digital assets and the overall growth of the cryptocurrency market. The future of spot Ethereum ETFs remains uncertain for the time being, as the SEC continues to evaluate the complex issues surrounding their classification and suitability for approval.
