SEC Delays Lower Ethereum ETF Approval Expectations for May Despite Staking Additions

The US SEC has delayed the approval process for several highly anticipated, newly regulatory ethereum exchange-traded funds (ETFs). filings show.

The delays affect proposals from investment firms including VanEck, Ark Invest, Hashdex and Grayscale, which has added a staking component to its eth ETF application alongside Fidelity, sparking discussions about the future of cryptocurrency ETFs. In the USA.

Lower chances of approval

Bloomberg ETF analyst James Seyffart, who has been following developments closely, expressed a change from its previously cautiously optimistic outlook regarding the approval of ethereum ETFs.

He noted that the SEC's lack of engagement on ethereum-specific issues stands in stark contrast to its approach to bitcoin ETFs in the previous fall, which dampened hopes for a positive outcome before the crucial May 23 deadline.

Similarly, Eric Balchunas recently noted that the absence of bullish signals and sources that were present before the bitcoin ETF approvals significantly reduces the chances of a favorable decision for ethereum ETFs, estimating the probabilities at 35%.

The conversation extended beyond the ETF delays and addressed the broader regulatory environment for cryptocurrencies. Some suggested that the SEC could insist on a court order before approving ethereum ETFs, citing possible differences between ethereum and bitcoin in terms of their designation.

However, Seyffart disagreed with the idea that ethereum could be classified as a security, a designation that could fundamentally affect its regulatory treatment.

The discussion also delved into the realm of possible outcomes and strategies. Seyffart speculated on the future of Grayscale's ethereum futures product and its implications for potential legal challenges against SEC decisions.

ETF Betting

Meanwhile, both Fidelity and Grayscale have added modifications to their ethereum ETF applications to include a staking component.

Staking, a fundamental aspect of ethereum's proof-of-stake (PoS) model, involves locking digital assets to support the security and functionality of the network, offering participants rewards in the form of additional cryptography.

Grayscale's proposal, like Fidelity's, allows the ETF to allocate part of its holdings to bets through select providers, including potentially affiliates. The move is designed to explore income generation possibilities within a regulated financial framework, and the ETF is expected to receive ether tokens as network rewards, which could be considered income for the fund.

However, this addition comes amid increased scrutiny from US lawmakers, who recently urged the SEC to halt the approval of new cryptocurrency-related ETFs due to concerns about investor risks.

As the May 23 deadline approaches, the crypto community remains nervous, awaiting new developments.

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