SEC delays decision on Ethereum ETFs, Grayscale to offer staking

The Securities and Exchange Commission (SEC) has delayed its decision on the approval of the Hashdex Nasdaq Ethereum exchange-traded fund (ETF), extending the timeline to May 30, 2024.

The SEC’s decision marks another instance in a series of delays concerning Ethereum ETFs, reflecting the regulatory body’s cautious approach towards the cryptocurrency investment products.

The Hashdex ETF, which proposes to hold both spot ether and futures contracts, is managed by Toroso Investments and aims to provide investors with exposure to Ethereum through a regulated, exchange-traded format.

Similarly, the SEC has also deferred its verdict on the ARK 21Shares Ethereum ETF, which seeks to track the performance of Ether, setting a new decision date for May 24, 2024.

Bloomberg ETF analyst Eric Balchunas adjusted his estimate for a May approval from about 70% to 30%. Another Bloomberg analyst, James Seyffart, also diminished hopes for spot Ethereum ETFs as he expects denial by May 23, citing a lack of engagement from the SEC on Ethereum.

Previously, the SEC has approved ether futures-like ETFs but not spot or mixed ones. In October, nine futures-based products were simultaneously green-lit.

Meanwhile, Grayscale Investments is seeking to introduce staking to its proposed spot Ethereum ETF, aiming to mitigate inflationary pressures from Ethereum’s proof-of-stake protocol. This initiative mirrors efforts by other firms, like Fidelity, which recently amended its spot Ethereum ETF application to include staking.

Despite the successful conversion of Grayscale’s Bitcoin trust to a spot bitcoin ETF following a court victory, the path to approval for an ether-backed product remains uncertain. SEC Chair Gary Gensler has made it clear that the agency’s decision on bitcoin ETFs is specific to bitcoin and should not be interpreted as a broader acceptance of other cryptocurrency products.

During a media briefing, Gensler said, “As I said two weeks ago, that which we did with regard to bitcoin exchange traded products is cabined to this one commodity non-security and shouldn’t be read to be anything other than that.”

BlackRock, the world’s largest asset manager, filed for the iShares Ethereum Trust in November. The proposed ETF, named “iShares Ethereum Trust,” aims to provide investors with exposure to Ethereum’s price movements through traditional stock exchange channels.

Similarly, Fidelity’s application for its own Ethereum fund was also delayed, as indicated in a filing last week. Also in October, Grayscale Investments, in partnership with NYSE Arca, submitted its own application to the SEC seeking approval to transform the Grayscale Ethereum Trust (ETHE) into a spot Ethereum exchange-traded fund (ETF).