It
should
come
as
no
surprise
that
the
U.S.
Securities
and
Exchange
Commission
(SEC)
is
not
jumping
on
the
ether
(ETH)
exchange-traded
fund
(ETF)
bandwagon.
Yesterday,
the
agency
punted
on
BlackRock’s
ETH
ETF
proposal,
filed
initially
in
November,
a
few
months
after
the
asset
manager
unexpectedly
decided
to
try
to
launch
a
spot
bitcoin
fund.
This
is
an
excerpt
from
The
Node
newsletter,
a
daily
roundup
of
the
most
pivotal
crypto
news
on
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beyond.
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here.
“The
Commission
finds
it
appropriate
to
designate
a
longer
period
within
which
to
take
action
on
the
proposed
rule
change
so
that
it
has
sufficient
time
to
consider
the
proposed
rule
change
and
the
issues
raised
therein,”
according
to
the
SEC’s
report.
It
used
nearly
identical
language
last
week,
when
also
delaying
the
Fidelity
Ethereum
Fund.
This
was
the
decision
most
market
analysts
predicted.
A
JP
Morgan
(JPM)
analyst
put
the
odds
of
the
SEC
approving
an
ETH-based
ETF
by
May
at
no
more
than
50%,
in
a
recent
report.
Bloomberg’s
seasoned
ETF
expert
James
Seyffart
said
delays
for
spot
ether
ETF
proposals
will
likely
“continue
to
happen
sporadically”
over
the
next
few
months.
So
what
exactly
needs
to
happen
for
an
ETH
ETF
to
go
to
market?
The
situation
seems
even
less
cut-and-dried
than
the
case
for
bitcoin
ETFs,
which
recently
went
live
after
much
dillydallying
by
the
SEC.
For
years,
the
SEC
hesitated
approving
bitcoin
funds
over
fears
of
potential
market
manipulation.
BlackRock,
the
world’s
leading
ETF
issuer
and
largest
asset
manager,
was
the
first
to
devise
an
exchange
surveillance
protocol
to
appease
those
fears,
and
the
11
ETF
issuers
also
made
several
major
concessions
to
the
regulator
—
like
settling
in
cash,
rather
than
bitcoin
—
when
seeking
its
approval.
Ultimately,
though,
it
was
Grayscale’s
court
victory
that
forced
SEC
Chairman
Gary
Gensler
to
approve
the
bitcoin-based
financial
products.
An
appellate
judge
criticized
the
agency’s
crooked
logic
in
earlier
approving
futures-based
ETFs
but
not
spot-based
ones,
and
required
it
to
reevaluate
its
listing
standards.
It
might
be
a
good
sign,
then,
that
ETH
futures
ETFs
are
already
live.
However,
in
his
public
announcement,
Gensler
said
the
decision
to
approve
bitcoin
ETFs
“should
in
no
way
signal
the
Commission’s
willingness
to
approve
listing
standards
for
crypto
asset
securities.”
SEC
Commissioner
Hester
Peirce,
the
most
pro-crypto
U.S.
regulator,
told
Coinage
recently
that
the
SEC
isn’t
looking
to
go
to
court
over
ETH
ETFs,
and
said
it
would
“apply
precedent”
as
it
makes
its
decisions.
Peirce
often
breaks
with
her
commission
colleagues,
and
makes
public
statements
criticizing
the
agency’s
many
legal
challenges
brought
against
crypto
firms
and
projects.
In
a
scathing
public
statement
following
Gensler’s
bitcoin
ETF
announcement,
Peirce
said
the
agency
“squandered
a
decade
of
opportunities
to
do
our
job”
in
an
“unnecessary,
but
consequential,
saga”
that
kept
in-demand
products
from
investors
and
“has
driven
retail
investors
to
less
efficient
means
of
attaining
Bitcoin.”
Although
Peirce
now
suggests
the
SEC
and
Gensler
have
internalized
the
lesson,
and
will
therefore
not
shift
the
“goalposts”
like
what
happened
to
bitcoin
ETF
applicants,
she
is
hesitant
to
“predict
what
will
happen
with
any
particular”
crypto
product.
In
the
Coinage
interview,
she
noted
it
takes
“a
lot
of
work”
to
get
ETFs
ready
for
market,
and
that
the
“facts
and
circumstances”
do
matter.
“Congress
did
not
authorize
us
to
tell
people
whether
a
particular
investment
is
right
for
them,”
Peirce
said.
Bitcoin
was
in
a
better
position
for
approval
because
it’s
the
only
crypto
asset
regulators
uniformly
classify
as
a
commodity.
Breaking
with
earlier
regulators
who
said
Ethereum
was
“sufficiently
decentralized,”
Gensler
has
raised
concerns
over
ETH,
particularly
after
the
network
shifted
to
a
staking
mechanism.
“The
ongoing
lawsuits
by
the
SEC
against
crypto
exchanges
offering
staking
services
for
proof-of-stake
blockchains
including
Ethereum,
make
a
spot
ether
ETF
approval
more
challenging
at
least
until
these
lawsuits
are
resolved,”
JP
Morgan
analyst
Nikolaos
Panigirtzoglou
wrote.
Panigirtzoglou
also
noted
the
SEC
hasn’t
directly
mentioned
ETH
in
its
lawsuits
against
crypto
exchanges
Kraken,
Coinbase
or
Binance
over
alleged
securities
law
violations,
indicating
it
might
actually
classify
the
cryptocurrency
as
a
commodity.
Further,
if
the
SEC
opened
a
fight
over
ETH
ETFs,
it
may
have
to
contend
with
the
Commodity
Futures
Trading
Commission,
a
sibling
rival
regulatory
body
that
has
also
claimed
jurisdiction
over
ETH.
All
this
together
suggests
that
ETH
ETFs
are
inevitable,
and
yet
there
are
still
many
obstacles
ahead.
Although
the
SEC’s
delaying
action
here
is
keeping
U.S.
consumers
from
accessing
a
safe,
tax-advantaged
way
of
gaining
exposure
to
the
second-largest
cryptocurrency,
it
may
ultimately
work
out
in
ETH’s
favor.
Peirce
has
said
multiple
times
that,
by
challenging
bitcoin
ETFs,
the
SEC
indirectly
induced
demand
by
creating
an
“artificial
frenzy”
around
the
products.
“Congress
did
not
authorize
us
to
tell
people
whether
a
particular
investment
is
right
for
them,”
she
said,
“but
we
have
abused
administrative
procedures
to
withhold
investments
that
we
do
not
like
from
the
public.”
