<img src="https://cryptoslate.com/wp-content/uploads/2024/01/ethereum-etf.jpg” />
The SEC has opened comments on Grayscale, Fidelity, and Bitwise's applications to launch spot ethereum exchange-traded funds (ETFs).
The notices apply to proposed rule changes through which two exchanges, Cboe BZX and NYSE Arca, intend to list and trade shares of the three funds.
Comments are open for 21 days after publication in the federal register.
This phase is a routine procedure in the ETF approval process, reflecting the approach taken with one-time bitcoin ETF applications, which previously encouraged feedback from US citizens and organizations.
Market correlations are key
Each notice discusses issues that are expected to influence the SEC when it comes time to approve or reject proposed ethereum spot ETFs.
Most importantly, the advisories discuss correlations between the eth futures markets and the eth spot markets and whether the eth spot market is of significant size relative to the eth futures market. The correlation is relevant because the SEC has previously approved eth futures ETFs.
NYSE Arca and Grayscale cited Coinbase analysis demonstrating the correlation and showing that fraud and manipulation are unlikely in the eth spot market. The two firms also said that the Investment Company Act of 1940 does not offer relevant protections that should lead to the denial of certain spot crypto ETFs, contrary to the SEC's claims.
Cboe and Fidelity stated that their proposal and analysis prove that the eth spot market has a relevant size. NYSE Arca and Bitwise cited their own analysis to that end.
The notices also seek comments on other issues such as fund custody, creation and redemption models, and sponsor fees. Requests for comment are routine and do not indicate whether a fund is likely to win approval.
ethereum ETF
The call for comments comes after a history of postponed decisions by the SEC regarding ethereum spot ETFs. The participation of high-profile fund managers such as Grayscale, Fidelity and Bitwise emphasizes the importance and growing interest in cryptocurrency-based financial products among traditional investment firms.
This initiative by the three fund managers aims to establish a spot eth ETF, allowing investors to buy shares that reflect the price of ethereum. Following the SEC's approval of 11 bitcoin ETFs in January, which have since seen significant inflows and popularity, there is strong momentum to secure similar regulatory green lights for ethereum-based products.
Notably, Coinbase held talks with the SEC last week regarding Grayscale's proposed ethereum ETF. Grayscale aims to transform its existing ethereum Trust into a spot eth ETF, a move Coinbase publicly supported in a recent regulatory filing.
The push for ethereum ETFs comes amid different market sentiments. While the SEC's approval of bitcoin spot ETFs marked an important milestone, analysts remain divided over the prospects for ethereum ETFs.
Some speculate that the SEC could delay its approval to create a temporary separation between bitcoin and ethereum products. Despite this, entities such as Standard Chartered have expressed optimism, anticipating SEC approval in May.
