The US SEC has postponed the approval process for several highly anticipated Ethereum exchange-traded funds (ETFs), according to recent regulatory filings.
The delays affect proposals from investment firms including VanEck, Ark Invest, Hashdex and Grayscale – which, along with Fidelity, has added a staking component to its ETH ETF application – sparking discussions about the future of crypto ETFs in the US .
Lower chance of approval
Bloomberg ETF analyst James Seyffart, who has been closely watching the developments, expressed a shift from his previously cautiously optimistic view on the approval of Ethereum ETFs.
He noted that the SEC’s lack of involvement in Ethereum-specific issues stands in stark contrast to their approach to Bitcoin ETFs the previous fall, dampening hopes for a positive outcome by the crucial May 23 deadline.
Similarly, Eric Balchunas recently pointed out that the absence of bullish signals and sources that were present before the approval of the Bitcoin ETF significantly reduces the chances of a favorable decision for Ethereum ETFs, with the chances estimated at 35%.
The conversation extended beyond the ETF delays and touched on the broader regulatory environment for cryptocurrencies. Some suggested that the SEC would push for a court order before approving Ethereum ETFs, citing possible differences between Ethereum and Bitcoin in terms of their denomination.
However, Seyffart disagreed with the idea that Ethereum could be classified as a security, a designation that could have a fundamental impact on its legal treatment.
The discussion also moved into the area of possible outcomes and strategies. Seyffart speculated about the future of Grayscale’s Ethereum futures product and its implications for potential legal challenges to the SEC’s decisions.
Investing in ETFs
Meanwhile, both Fidelity and Grayscale have added changes to their Ethereum ETF applications to include a staking component.
Staking, a fundamental aspect of Ethereum’s proof-of-stake (PoS) model, involves locking up digital assets to support the security and functionality of the network, offering participants rewards in the form of additional crypto.
Grayscale’s proposal, like Fidelity’s, would allow the ETF to allocate some of its holdings to staking through select providers, potentially including affiliates. This move aims to explore monetization opportunities within a regulated financial framework, with the ETF expected to receive ether tokens as network rewards, which can be considered as income for the fund.
However, this addition comes amid increased scrutiny from US lawmakers, who recently urged the SEC to halt approval of new crypto-related ETFs over concerns about the risks to investors.
As the May 23 deadline approaches, the crypto community remains on edge, awaiting further developments.
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