Is Ethereum spot ETF on the horizon?

Author: Zhao Hao

According to media reports, four people familiar with the matter revealed that U.S. issuers and other companies expect that the U.S. Securities and Exchange Commission (SEC) will reject their applications to launch Ethereum spot ETFs.

Previously, VanEck, ARK Investment Management and seven other issuers have submitted listing applications for ETFs linked to Ethereum prices to the SEC. The SEC must respond to VanEck and ARK's documents on May 23 and May 24, respectively.

People familiar with the matter revealed that recent meetings between the SEC and issuers were not optimistic because agency staff did not discuss the implementation details of the financial product, which was in sharp contrast to the previous intensive and detailed discussions on Bitcoin spot ETFs.

Last October, the SEC approved the launch of several Ethereum "futures" ETFs. People familiar with the matter said that issuers at the meeting believed that the decision had paved the way for Ethereum "spot" ETFs and expressed their determination to resolve potential regulatory issues to the SEC.

But after listening to the issuers' statements, the SEC did not elaborate on specific concerns or ask general questions, indicating that the agency would refuse to pass these application documents. More broadly, the US regulator does not seem to want to copy the example of Bitcoin spot ETFs to other products.

Earlier this month, VanEck CEO Jan van Eck told the media that its application "is likely to be rejected." But some issuers said they still plan to submit more disclosure documents to the SEC to keep the dialogue going.

In fact, the current SEC Chairman Gary Gensler has always been a skeptic of cryptocurrencies, and the Bitcoin spot ETF was approved only after Grayscale Investments won a lawsuit against the SEC.

Critics say that if the Ethereum spot ETF is approved, it may pave the way for the launch of more speculative cryptocurrency ETFs, which will expose investors to risks beyond their expectations.

Todd Rosenbluth, director of ETF analysis at data company VettaFi, commented that "the regulatory outlook remains cloudy, and at present, the SEC seems more likely to postpone approval until later in 2024, or even longer."

Analyst Eric Balchunas believes that the probability of approving the Ethereum spot ETF before the end of May this year is only 25%, compared with his previous forecast of 70%. The report from prediction market Polymarket is even more pessimistic, giving a probability of only 11%.

According to Bitstamp's quotes, Ethereum fell 3% in the past 24 hours, and Bitcoin also fell nearly 2.8%.