- Ethereum ETF approvals seemed unlikely due to uncertainty around ETH’s securities status.
- US SEC has called on applicants to update their 19b-4 filings, suggesting a potential U-turn by the SEC.
- Some suggest the change of heart is due to lawmakers disapproving of the SEC’s hardline approach to the crypto industry.
The approval of the first US spot Bitcoin ETFs in January proved to be a massive boost for the BTC ecosystem, both in terms of price appreciation and mainstream credibility. Given the success of BTC ETFs, major investment firms, including BlackRock and Fidelity are keen to replicate this with Ethereum ETF products. However, uncertainty around Ethereum’s securities status in the US has been a major stumbling block.
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In a surprising turn of events, the Securities and Exchange Commission (SEC) has now asked ETH ETF applicants to amend and re-file their 19b-4 forms, which are used to inform the agency of “proposed rule changes.” Some industry experts have interpreted the move as a U-turn by the agency and that spot ETH ETFs will soon be approved.
Change of Heart on Ethereum ETFs?
The SEC’s request for spot Ethereum ETF applicants to re-file their 19b-4 forms potentially signaled a U-turn on the agency’s reluctance toward approving such products. Bloomberg analyst Eric Balchunas and colleague James Seyffart increased the odds of approval for a spot Ethereum ETF to 75%, up from 25% previously, on this new development.
Balchunas attributed the SEC’s apparent change of heart to the agency’s increasingly hardline approach toward the crypto industry becoming a contentious political issue, potentially costing the Democrats crucial votes in the upcoming presidential election in November.
The recent overturning of Staff Accounting Bulletin No. 121 (SAB121) by the US Senate, underscored growing concerns among lawmakers over the SEC’s rigid stance against digital assets. SAB121 prevented regulated firms from custodying crypto assets on behalf of clients. But the proposal passed the Senate with a 60-38 result, suggesting a rare display of bipartisanship over the agency’s uncompromising approach to regulating digital assets.
Although Bitcoin and Ethereum enjoyed a pass from the SEC in the recent past, Ethereum has been subject to increasing regulatory scrutiny since the SEC vs. Ripple lawsuit, with the agency backtracking on assumptions that Ethereum is a commodity, per the now infamous 2018 speech by former SEC director William Hinman.
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As recently as this week, before the SEC called on applicants to re-file 19b-4s, observers expressed doubt over ETH ETF approvals.
Bitcoin Maxi Era Over?
This week saw Seyffart express doubt over the SEC approving spot Ethereum ETF applications, citing a lack of engagement with applicants. Seyffart further explained that he expected the agency to delay the decision to approve based on the poor correlation between spot and futures prices.
However, the SEC’s sudden willingness to engage with applicants has caught the market off guard, leaving Ethereum advocates hopeful even against the narrative that altcoins will never win US spot ETF approval.
At the recent Bitcoin for Corporations event held in Las Vegas between May 1 – 2, MicroStrategy chair Michael Saylor voiced his belief that the SEC will never approve spot ETH ETF products. Saylor’s stance on the matter was unequivocal, stating, “Ethereum is not going to be approved. Sometime this summer, it will be very clear to everyone that Ethereum is deemed a crypto asset security, not a commodity.”
Saylor contended that this regulatory stance applies to every altcoin, asserting that Bitcoin is the only crypto asset that meets institutional investors’ regulatory approval and acceptance criteria.
Yet, with the narrative seemingly flipping to the SEC’s potential acceptance of spot ETH ETFs, Nic Carter, partner at Castle Island Ventures, declared that “the Saylor doctrine is over” and that Bitcoin will now need to compete fairly with altcoins “on tech” rather than relying on its regulatory pass.
On the Flipside
- The ETF approval process also requires the approval of the applicants‘ S-1 form, which is a general registration form covering matters such as details of business operations.
- Approval of spot ETH ETFs would likely open the door for other altcoin ETFs.
- Critics maintain that cryptocurrencies are highly speculative, making them suitable for mainstream investment products.
Why This Matters
The SEC’s decision on spot Ethereum ETFs has major implications for the rest of the cryptocurrency market. Approval would vote for confidence in the viability and maturity of digital assets in general, potentially attracting a new wave of institutional investors and accelerating mainstream integration.
Find out more about the pessimism around ETH ETF approval before recent developments.
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