Grayscale’s efforts to secure approval for its Ethereum Futures Trust exchange-traded fund (ETF) have encountered another setback, as the United States Securities and Exchange Commission (SEC) has opted to postpone its decision.
In a March 22 filing, the new deadline set by the SEC extends to May 30, moving beyond the initially anticipated March 31 decision date. This extension is aimed at providing the regulatory body with ample time to thoroughly evaluate the proposed rule change and address the concerns that have been raised.
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In its announcement, the SEC emphasized the necessity of allocating additional time for consideration, stating, “The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein.” This decision marks yet another delay in the approval process for Grayscale, following a similar postponement that took place in December 2023.
Regulatory Hurdles and Strategic Moves
Grayscale initially submitted its application for the Ethereum Futures Trust ETF in September 2023, aiming for a listing under the New York Stock Exchange Arca Rule 8.200-E. Some industry analysts perceived the move as a strategic effort to influence the SEC’s stance on cryptocurrency-based ETFs, particularly concerning Grayscale’s interest in a spot Ether ETF.
Bloomberg ETF analyst James Seyffart suggested that the futures ETF application might serve as a “trojan horse” to bolster Grayscale’s case for its spot Ether ETF application.
There's the delay order for @Grayscale's Ethereum Futures ETF Filing — as expected. pic.twitter.com/gT3x8iw3Ml
— James Seyffart (@JSeyff) March 22, 2024
Moreover, the regulatory landscape for cryptocurrency-based ETFs has been notably cautious, with the SEC taking measured steps in its approvals. The recent green light for spot Bitcoin ETFs on January 10 did little to alleviate the skepticism surrounding the regulatory body’s approach to Ether and other crypto-based ETFs.
Observers like John Lo, the founder of Capital, have expressed expectations of heightened scrutiny from the SEC on forthcoming crypto ETF proposals, especially in the wake of the regulatory body’s perceived concession in the case of Bitcoin ETFs.
Broader Implications for the Industry
The SEC’s hesitance to rapidly approve crypto-based ETFs, including those proposed by Grayscale, reflects a broader regulatory caution within the digital asset space. This cautious stance is not limited to Grayscale alone; other asset management giants such as BlackRock and Fidelity have also faced delays in their Ethereum ETF applications.
In early March filing, the SEC announced the postponement of decisions regarding BlackRock’s iShares Ethereum Trust and Fidelity’s Ethereum Fund, further underscoring the regulatory challenges faced by institutions seeking to bridge traditional finance with the burgeoning field of digital assets.
