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Ethereum ETFs Face Further Setbacks: Here’s What’s Causing the Delay
- SEC delays decision on several Ethereum spot ETFs, pushing ruling to 2024.
- Regulator possibly concerned that proof of stake consensus increases risk of network manipulation.
- It’s looking increasingly likely the first Bitcoin spot ETFs will feature cash creation, not in-kind.
The US Securities and Exchange Commission (SEC) has delayed its decision to approve or disapprove several applications for spot Ethereum-based exchange traded funds (ETFs).
Filings published Monday show the regulator has pushed decisions on the proposed Grayscale, Hashdex, Ark 21 Shares and VanEck ETFs to 2024.
These delays come after an earlier decision on Invesco Galaxy’s application for an Ethereum spot ETF was delayed last week.
Why All The Delays?
In its filings to delay, the SEC said it was “instituting proceedings” into the applications and asked for public input.
The SEC hasn’t made a statement articulating exactly what its concerns are with Ethereum spot ETFs, but in its filings it did raise questions about Ethereum’s proof of stake consensus mechanism and whether it might increase the network’s susceptibility to manipulation.
Based on this, it appears likely the SEC needs extra time to determine if the differences between Ethereum and Bitcoin make Ethereum unsuitable for a spot ETF.
Speaking recently in an interview on the Unchained podcast with Laura Chin, Bloomberg Research Analyst, James Seyffart, said he doesn’t believe Ethereum’s status as a security is an issue:
My view is that the SEC has pretty much implicitly accepted Ethereum as a commodity at this point. They also now have approved Ethereum futures ETFs, which are squarely in their purview.
James Seyffart, Bloomberg Research Analyst If true, this would make the eventual approval of an Ethereum spot ETF much more likely.
Cash Creates Looking More Likely For Bitcoin ETFs
In the other big crypto ETF story, it’s looking increasingly likely that the first raft of approvals will be for funds using cash creation, as opposed to in-kind creation. In the last few days both BlackRock and Wisdomtree have amended their spot Bitcoin ETF applications to include cash creates in an attempt to increase the likelihood of approval.
Despite the tax and efficiency advantages of in-kind creates, the SEC seems to favour cash creates — possibly because it allows them more regulatory control over the funds.
Author
Jody McDonald
Jody is a Brisbane-based freelance writer who specialises in writing about business, technology, and the future of work.
