Ethereum ETF Approval Remains Uncertain as SEC Extends Review Period
The U.S. Securities and Exchange Commission (SEC) has announced a delay in its decision regarding Franklin Templeton’s proposed spot Ethereum exchange-traded fund (ETF). The regulatory body has extended the deadline for the review to June 11, 2024, citing the need for more time to thoroughly evaluate the complex issues surrounding the classification of Ethereum and its suitability for a spot ETF.
This move mirrors a similar delay in the SEC’s decision on Grayscale’s Ethereum Trust proposal, which seeks to convert the existing trust into a spot ether ETF. The cautious approach taken by the SEC reflects the growing complexity and uncertainty surrounding the approval of these financial products.
The proposed Franklin Templeton ETF aims to track the price of ether and would utilize Coinbase Custody Trust Company and the Bank of New York Mellon as custodians. The delay in the SEC’s decision comes amidst a surge in applications for spot cryptocurrency ETFs, with industry giants like Fidelity and BlackRock joining the race.
Initially, analysts had anticipated a decision in May, but the recent SEC delays have tempered expectations. Bloomberg analyst Eric Balchunas has revised his approval likelihood estimate from 70% to a more conservative 35%, highlighting the growing uncertainty.
Adding to the complexity, the SEC has recently initiated a period of public comment regarding proposals from Bitwise Ethereum Trust, Fidelity Ethereum Fund, and Grayscale Ethereum. This move follows the SEC’s earlier approval of several spot Bitcoin ETFs in January 2024, but SEC Chair Gary Gensler has cautioned against interpreting this as an endorsement of crypto assets or their regulatory status.
Industry figures, such as VanEck CEO Jan van Eck and CoinShares CEO Jean-Marie Mognetti, have expressed skepticism about the approval prospects for spot Ethereum ETFs, predicting a prolonged period of inaction from the SEC on pending applications.
Furthermore, 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.
Despite the regulatory hurdles and dimmed expectations, the market’s appetite for cryptocurrency investment vehicles remains strong. The SEC’s earlier approval of spot Bitcoin ETFs in January 2024 led to a substantial influx of capital, with these ETFs attracting a cumulative net inflow of $12.39 billion as of writing. However, the future of spot Ethereum ETFs remains uncertain as the SEC continues to navigate the complex issues surrounding their approval.
