SEC extends review to January 2024

The United States Securities and Exchange Commission (SEC) has extended the evaluation period for Grayscale’s proposed Ethereum spot ETF.

The U.S. top watchdog said it needs more time to review the proposed rule change that would enable NYSE Arca to list and trade shares of the Grayscale Ethereum Trust as an exchange-traded fund (ETF).

The SEC has set a new deadline for its decision or the initiation of proceedings to determine its disapproval, which is January 25, 2024. This extension allows the SEC more time to thoroughly assess the proposal and address any concerns raised, it said.

“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,” reads the SEC’s official notice today.

Grayscale submitted its application in October, seeking to convert shares of its Grayscale Ethereum Trust into an Ether ETF. The company is one of several firms, including BlackRock, Hashdex, ARK 21Shares, Invesco Galaxy, VanEck, and Fidelity, waiting for the SEC to make a decision regarding their spot cryptocurrency ETF applications.

Opinions are divided on the SEC’s next steps towards crypto-based ETF proposals. Some view the regulator’s decision not to appeal in the Grayscale case as a positive sign. In contrast, others remain skeptical, hinting that SEC Chair Gary Gensler might have unforeseen plans.

While the SEC has approved investment products tied to cryptocurrency futures in the past, it has not yet given approval for a spot Bitcoin (BTC) or Ethereum (ETH) ETF on a U.S. exchange. If the commission approves a spot BTC ETF, it could proceed with approving ETFs from multiple firms simultaneously, according to Bloomberg ETF analyst James Seyffart.

The delay in Grayscale’s Ethereum spot ETF proposal follows a previous delay by the SEC in deciding about the company’s filing for an Ethereum futures ETF, which was submitted in September.

The Grayscale Ethereum Trust currently stands as the world’s largest ether investment product, managing almost $5 billion in assets. When launching a new crypto ETF, regulatory authorization is typically sought from the exchange that lists the ETF’s shares, rather than the sponsor itself.

Similar to Grayscale’s Bitcoin fund, the Grayscale Ethereum Trust is the largest Ethereum investment vehicle globally, accounting for 2.5% of all circulating ETH.

The conversion into a spot ETF has been the long-term plan for the Grayscale Ethereum Trust since its launch in 2019. Presently, ETHE shares trade at a significant 30% discount compared to the underlying ETH held by the trust. While the trust’s ETH holdings are valued at approximately $5.14 billion, its shares total only around $3.6 billion.