News & Analyses

Grayscale optimistic despite SEC’s silence

  • Grayscale’s chief legal officer says the SEC’s previous engagement with Bitcoin ETFs implies that Ethereum ETFs don’t need much engagement.
  • Bloomberg analyst Eric Balchunas says he is still pessimistic about any chance of approval.
  • SEC’s probing of companies related to the Ethereum Foundation is key as May 23 deadline for the ETF approval approaches.

Ethereum (ETH) price may experience volatility in the coming weeks as industry insiders provide their predictions for the SEC’s approval of a spot Ethereum ETF. Grayscale’s chief legal officer, Craig Salm, expressed optimism on Monday that the SEC will give a nod to the second-largest digital asset amid a recent probe of the Ethereum Foundation.

SEC’s delay of spot Ethereum ETF applications

Considering spot Bitcoin (BTC) ETFs’ success, many investors expect a similar impact on Ethereum and the tokens in its ecosystem.

However, the SEC has delayed decisions on approving filings from financial institutions like BlackRock, VanEck, Fidelity, Invesco Galaxy, Franklin Templeton, Hashdex, ARK21Shares, and Grayscale. Due to the delay, some analysts and investors have adjusted their previous optimistic predictions, echoing reasons for the Commission’s refusal to engage with institutions.

Why the SEC isn’t engaging with ETH ETFs applicants

In an X post on Monday, Craig Salm stated that he still believes Ethereum spot ETFs “should be approved” despite recent opinions suggesting their approval is unlikely. He stated that the Commission had constructive engagement with stakeholders in the months leading up to the spot Bitcoin ETF approval, discussing key issues like custody, creation/redemption procedures, authorized participants, liquidity providers, etc.

Also read: Ethereum Foundation subpoenae threatens ETH ETF approval odds

“All of these issues were figured out and are identical when comparing spot Bitcoin to Ethereum ETFs. The only difference is rather than the ETF holding bitcoin, it holds ether…So in many ways, the SEC already has engaged and issuers simply have less to engage on this time”, said Salm.

He went on to agree with Paul Grewal, Coinbase’s chief legal officer, on spot Ethereum ETFs, citing the CFTC’s classification of Ethereum as a commodity. He said, “I don’t think perceived lack of engagement from regulators should indicate one outcome or another.”

A few hours later, Bloomberg analyst Eric Balchunas stated that he’s still very pessimistic about the chance of a spot Ethereum ETF approval, saying, “the lack of engagement seems to be purposeful vs procrastination.”

Another Bloomberg analyst James Seyffart has also predicted that the SEC will “ultimately deny” spot Ethereum ETFs for this round on May 23.

SEC probe of Ethereum Foundation can change everything

Some crypto community members have expressed that Salm left out a key issue – the recent SEC investigations targeted at the Ethereum Foundation.

The SEC issued subpoenas to three firms connected to the Ethereum Foundation, and indications are that the aim is to classify Ethereum as a security, especially with its transition to the Proof-of-Stake consensus mechanism in 2022. Some analysts have said that if the SEC classifies Ethereum as a security, it may imply stricter regulations on the cryptocurrency and institutions dealing with it, a significant drop in its price, and a potential spot Ethereum ETF disapproval.

As May 23—the deadline for the SEC to decide on VanEck’s application—approaches, it’s crucial to consider these factors and how they will affect Ethereum’s price.

ETH is trading at $3,629, up 5.4% on the day, as of the time of writing.

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