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On Monday, new developments suggest that the U.S. Securities and Exchange Commission (SEC) might be rethinking its stance on spot Ether (ETH) exchange-traded funds (ETFs). Bloomberg ETF analysts James Seyffart and Eric Balchunas have indicated a shift in the SEC’s approach, raising the odds of approval from 25% to 75% after “hearing chatter” about the financial regulator’s internal discussions.
Analysts Adjust Predictions
On Monday Seyffart and Balchunas posted on X to update their predictions regarding the SEC’s decision on spot Ether ETFs. “The SEC might be doing a 180 on their expected denial of spot Ether exchange-traded funds this week,” wrote Balchunas. This new perspective is based on various signals, including recent SEC filings, public statements from SEC Chair Gary Gensler, and insider reports suggesting that the commission might be leaning towards approval following political pressure on Democrats to reverse course on crypto.
Seyffart echoed this sentiment, mentioning that the issue had become “increasingly political.” He hinted at a surge of related filings in the coming days if their sources were correct. “Never gonna hear the end of this from the [Ether] people in my replies if this turns out to be true,” Seyffart remarked, highlighting the potential impact on the cryptocurrency community.
Upcoming Deadlines and Broader Implications
The SEC’s decision on VanEck’s spot Ether ETF is due by May 23. This decision is critical as VanEck’s application is the first in a series of pending spot Ether ETFs, including those from ARK 21Shares, Hashdex, Invesco Galaxy, BlackRock, and Fidelity. The SEC has already delayed VanEck’s application as long as allowed under regulatory guidelines, setting the stage for a potentially groundbreaking decision.
In an April interview, VanEck CEO Jan van Eck expressed skepticism about the SEC’s approval of his company’s ETF application in May. This skepticism seemed justified when Grayscale withdrew its application for an Ether futures ETF on May 7, followed by CEO Michael Sonnenshein’s resignation announcement on May 20 (Cointelegraph).
Political and Regulatory Dynamics
The evolving political landscape could also influence the SEC’s decision. Recently, U.S. lawmakers in both the House of Representatives and Senate voted to overturn an SEC rule impacting banks dealing with companies holding digital assets. This congressional resolution’s future remains uncertain, pending President Joe Biden’s decision to either veto or sign it into law.
Furthermore, the SEC has requested exchanges to update their 19b-4 filings, suggesting a potential move towards approving these applications. This request has led to speculation that the SEC might be progressing towards an approval decision. However, even if the 19b-4 filings are approved, the ETFs would still need their S-1 applications cleared before trading could commence, a process without a defined timeline.
Industry Reactions and Future Prospects
One company in talks with the SEC reported a more optimistic outlook, feeling that the regulatory body was no longer dragging its feet. This optimism is bolstered by the reassessment from Seyffart and Balchunas, who increased their approval odds based on new information and insider sources
The SEC’s investigation into whether Ether qualifies as a security continues to add complexity to the situation. This investigation, launched after Ethereum transitioned from a proof-of-work to a proof-of-stake consensus mechanism, could influence the SEC’s final decision. A recent development from Prometheum, which launched its Ether custody service with plans to offer services for other digital assets considered securities, might also play a role in shaping the SEC’s view.
As the May 23 deadline approaches, the financial and crypto communities are on high alert. The SEC’s decision could significantly impact the market, setting a precedent for future cryptocurrency ETF approvals, taking crypto centre stage for the upcoming election cycle, and shaping the regulatory landscape for digital assets in the United States.