“US Regulators Expected to Reject Ethereum ETF Applications Amid Recent Discouraging Meetings”
American regulators are anticipated to decline requests for Ethereum exchange-traded funds (ETFs) following recent discouraging meetings with major participants like VanEck and ARK Investment Management, with decisions expected by late May.
Discussions with the Securities and Exchange Commission (SEC) have been described as one-sided, lacking objective feedback compared to previous Bitcoin ETF talks.
The U.S. Securities and Exchange Commission (SEC) appears poised to reject numerous Ethereum ETF proposals, according to a recent report by Reuters. Recent discussions between American issuers and the SEC have largely leaned towards a negative outcome in recent weeks.
Major market players, including VanEck and ARK Investment Management, alongside seven other issuers, face substantial hurdles as the SEC scrutinizes their proposed Ethereum ETFs.
Unproductive Discussions:
Recent interactions between ETF issuers and SEC officials have been largely disappointing from the issuers’ perspective. These discussions lacked the engagement and probing questions towards details that characterized previous meetings, particularly those leading to the approval of Bitcoin ETFs.
Four anonymous participants in the discussions described the meetings as one-sided, with little substantive or absent comments from SEC staff regarding the proposed offerings.
This shift in the SEC’s approach is noteworthy, especially given the background of the agency’s chairman, Gary Gensler, a known skeptic of cryptocurrencies. His leadership has seen a long-standing resistance to Bitcoin ETFs, citing concerns over market manipulation.
However, this stance appeared to shift with the approval of Bitcoin ETFs following successful legal challenges by Grayscale Investments. This approval has instilled hope among issuers that Ethereum products may follow suit.
Despite issuers’ attempts to align Ethereum ETF proposals with existing Bitcoin ETFs, SEC staff remained largely unresponsive. This has led issuers to anticipate eventual rejections of Ethereum ETF applications by the SEC.
Market Impact and Ongoing Efforts:
The potential rejections are not merely procedural setbacks but also cast shadows on Ethereum’s market performance. Hong Fang, CEO of crypto exchange OKX, noted Ethereum’s price performance has been weak compared to Bitcoin, which has seen a 51% increase this year. This lackluster performance is partly attributed to market expectations of negative rulings from the SEC, adding bearish pressure on Ethereum prices.
In response to the expected rejections, some issuers expressed intent to provide additional disclosures to the SEC, hoping to keep dialogues open and address any potential concerns that may influence the SEC’s decisions.
The only disclosed meeting so far involved cryptocurrency exchange Coinbase, focusing on Grayscale’s attempt to convert its Ethereum Trust into an ETF. Arguments presented in these meetings underscored the significant linkage between Ethereum futures and spot markets, reflecting the rationale that secured approval for Bitcoin ETFs.
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However, significant doubts persist within the SEC regarding the depth and quality of Ethereum market data compared to the more established Bitcoin futures market. Matt Hougan, Chief Investment Officer at Bitwise Asset Management, suggested the SEC’s hesitancy could stem from a desire for more comprehensive data to verify market maturity and stability.
Continuous uncertainty and the SEC’s reluctance to advance Ethereum ETFs may lead to further legal challenges, akin to those previously faced by Bitcoin ETF proposals. Industry insiders remain cautiously optimistic, acknowledging that approval may require more lawsuits or significant shifts in the SEC’s perspective on cryptocurrency-related products.
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