The Securities and Exchange Commission (SEC) has extended the 45-day comment period on a proposed rule change that would allow NYSE Arca to list and trade shares of the Grayscale Ethereum Trust as an exchange-traded fund (ETF), according to a SEC filing released on December 5.
NYSE Arca originally filed the proposed rule change with the SEC on October 10 of this year. Normally, the SEC has 45 days from publication of the proposal in the Federal Register to make a decision, but the regulator has chosen to extend this timeline to January 25, 2024, to allow more time to consider the implications to consider.
The proposed rule change would allow the $5 billion Grayscale Ethereum Trust, one of the largest institutional investment vehicles for Ether, to be converted into a spot ETF. Unlike the current trust structure, which does not allow redemptions, an ETF would provide greater liquidity and eliminate the long-standing discount at which the trust has historically traded to the net asset value of the underlying Ether investments.
Grayscale has stated that they see the conversion to an ETF as “the natural next step in the evolution of the product,” bringing Ethereum further into the regulated financial system. However, the SEC has yet to approve a spot crypto ETF in the US after delaying decisions on several Bitcoin ETF applications earlier this year.
ETF mania
The extended timeline for an SEC decision comes as other major financial institutions such as Fidelity and BlackRock have submitted their own proposals for spot Ethereum ETFs in the past month. The SEC also recently opened a comment period to solicit public feedback on Fidelity’s filing.
As institutional interest continues to grow, the SEC has maintained a cautious stance, pushing back on decisions and calling for more commentary to fully assess the risks of market manipulation, regulatory mechanisms, custody requirements, and other factors related to the crypto asset class.
With the Grayscale decision likely to come in early 2024, all eyes are on the SEC to see if it finally gives the green light to accessible, regulated crypto investment vehicles in the US markets.
