Leading multinational asset manager and investment company BlackRock has suffered a minor setback on its spot Ethereum ETF application, as the United States Securities and Exchange Commission (SEC) delayed its decision on its spot Ethereum ETF proposal to at least March 10. 2024.
The statement, filed by the SEC on January 24, 2024, activates a section of the Securities and Exchange Act that empowers the agency to extend its deadline for the spot Ether ETF approval just one day before the expiry of the preceding deadline (January 25, 2024). While the new deadline is March 10, 2024, the SEC reserves the right to extend it several times more, with the final deadline being August 7, 2024.
Recall that BlackRock recently got the nod to offer spot Bitcoin ETFs in a move hailed as one of the most revolutionary for the cryptocurrency industry. With most analysts predicting a fair chance for spot Ethereum ETF approval, experts believe the nod will likely not come before May.
About Spot Ethereum ETFs
Spot Ethereum ETFs, also described as physically-backed Ether ETFs, are similar to futures Ether ETFs, but operating institutions purchase and hold the cryptocurrency in their reserves. So, these institutions list shares on stock exchanges based on the value of the ETH tokens in stock, offering investors exposure to the cryptocurrency without requiring them to purchase or hold them.
Unlike buying real Ethereum, investors in spot Ether ETFs do not own the actual tokens; they only own their underlying value through shares in the holding company. So, they cannot convert their shares to Ethereum tokens, for example.
Spot Ethereum ETFs have many potential advantages. For one, Wall Street-kind stockbrokers can directly access the value of Ethereum using conventional stocks. Also, investors interested in crypto price movements without the tech savviness to use crypto wallets can always use spot ETFs in Ether.
One proposal by BlackRock to provide spot Bitcoin ETFs under the iShares Bitcoin Trust (IBIT) was among the eleven that the SEC approved earlier this year. Prognosticating that the BlackRock spot Ether ETF application will benefit from the performance of Bitcoin, analysts greeted the announcement as revolutionary.
The SEC Will Likely Decide by May
Delays for crypto spot ETF proposals are not uncommon or unexpected; they happened several times last year during the run-up to the much-celebrated Bitcoin ETF approval earlier this month.
BlackRock is also not the only spot Ethereum application to suffer this fate. The Grayscale Ethereum Trust suffered the same fate, announced in a loaded statement asking for opinions from the public on the idea of spot Ethereum ETFs.
Among other questions, the statement deferring the Grayscale spot Ether ETF decision raised the question of the potential susceptibility to fraud of the Ethereum blockchain due to its transition to the proof-of-stake mechanism. It also charges knowledgeable individuals to submit opinions, which the regulator promised would inform its final decision on spot Ethereum ETFs.
With the apparent progress on spot Ethereum ETF applications, most analysts expect the agency to reach a verdict by May. If it is anything like the spot Bitcoin ETF decision, we may expect to see the decision on the proposals of both BlackRock and Grayscale on the same day.
What to Expect From the SEC
While prominent investment bankers and financial experts are (mostly) optimistic about a spot Ethereum ETF approval this year, there are solid arguments against it, with the strongest unsurprisingly coming from the SEC chairperson Gary Gensler himself after the regulator decided to approve 11 spot Bitcoin ETFs earlier this month.
“…that which we did about bitcoin exchange-traded products is cabined to this one commodity non-security and shouldn’t be read to be anything other than that,” the SEC chair was quoted as saying in a media briefing on Wednesday.
On the approval side of the debate is Eric Balchunas, a senior ETF analyst at Bloomberg who predicted a 70% chance of spot Ethereum ETF approval by May following the decision by the SEC on spot Bitcoin ETFs. Polymarket also has a similar prediction, going for a more optimistic 74% chance of spot Ether ETFs coming to the markets later this year.
On the other hand, J.P. Morgan is not too optimistic about the highly anticipated development. In a note to clients earlier this month, the investment bank described the chances of a spot Ethereum approval by May as “not higher than 50%.”
