SEC delays decision on Fidelity’s spot Ethereum ETF

The U.S. Securities and Exchange Commission (SEC) has postponed its decision on Fidelity’s proposal for a spot Ethereum exchange-traded fund (ETF). The new deadline for the SEC’s decision is now set for March 5, as indicated in a recent filing.

This extension allows the SEC more time to thoroughly consider Fidelity’s proposal and the broader implications of approving a spot Ethereum ETF. Fidelity initially filed for the Fidelity Ethereum Fund in November, citing a past court ruling that questioned the SEC’s rationale for rejecting spot crypto ETFs while allowing futures-based products.

The SEC’s move comes after its recent authorization of 11 spot bitcoin ETFs, sparking discussions in the industry about the possibility of a spot Ethereum ETF being next. Fidelity is not alone in pursuing a spot Ethereum ETF; it joined industry giant BlackRock in this endeavor late last year. The applications for these spot products came shortly after the launch of ether futures ETFs.

Nevertheless, the SEC’s decision to allow futures-based ETFs might indicate the regulator’s perspective on Ethereum. Specifically, the agency might be leaning towards treating Ethereum similarly to Bitcoin, implying that it may not be regulated as a security.

Fidelity’s filing highlights the investor protection benefits amidst a landscape where U.S. investors are currently adopting higher-risk strategies to gain cryptocurrency exposure. “U.S. retail investors have lacked a U.S. regulated, U.S. exchange- traded vehicle to gain exposure to ETH,” it says.

Citing the recent Grayscale court decision, Fidelity’s filing points out inconsistencies in the SEC’s stance, noting the agency’s approval of futures-based crypto ETFs while rejecting spot-based ones. The asset management behemoth, with $4.5 trillion under management, is advocating for a regulated product that could mitigate risks associated with unregulated crypto entities, as seen with the failures of FTX, Celsius Network, and BlockFi.

“To this point, approval of a Spot ETH ETP would represent a major win for the protection of U.S. investors in the crypto asset space. If a Spot ETH ETP was available, it is likely that at least a portion of the billions of dollars tied up in those proceedings would still reside in the brokerage accounts of U.S. investors,” the filing reads.

Fidelity’s move comes hot on the heels of BlackRock’s foray into the spot Ether ETF arena, signaling growing interest from major asset managers in providing crypto-based products. The filing reveals that Fidelity intends to list the Fidelity Ethereum Fund on the Cboe BZX Exchange, offering investors a regulated avenue to invest in Ether.

The quest for a spot Ether ETF in the U.S. is gaining momentum, with Fidelity becoming the seventh firm to seek SEC approval, joining others like VanEck, 21Shares, ARK Invest, Hashdex, Grayscale, and Invesco Galaxy.