SEC Seeks Public Comment on Spot Ethereum ETFs

Wealth Management Editor

Apr 04, 2024

Reviewed by: Ron Day

Edited by: James Rubin

The Securities and Exchange Commission has started three-week comment periods on spot Ethereum ETF applications by Fidelity Investments, Bitwise Asset Management and Grayscale Investments, even as doubts are raised about the cryptocurrency funds' imminent approval.

The agency asked “interested persons...to submit” comments regarding a potential rule change that would allow for the funds, which are based on the price of ether, the token of the Ethereum blockchain, according to one new and two amended notices on April 2.

The notices come even as the SEC has grown wary about the proposed products, delaying decisions on applications not only by BlackRock and Grayscale Investments but also Hashdex Asset Management Ltd. and Ark Invest.

As it did in the run up to its approval of spot bitcoin ETFs earlier this year, the agency has noted its concerns about the funds exposing investors to market manipulation and fraud. ETF analysts have grown pessimistic about May approvals, and Bloomberg analysts say a hoped-for May approval is unlikely given the lack of engagement between the agency and applicants.

Investors can currently purchase shares in Ethereum futures ETFs. The SEC approved nine of these funds in October. In its current spot Ethereum ETF deliberations, it is factoring in the trading and liquidity of futures contracts on the cryptocurrency, similar to its process in evaluating the spot bitcoin products.

Spot Bitcoin ETFs' Record Pace

Spot bitcoin ETFs have been this year's fastest growing ETFs so far this year, generating inflows and assets under management at record pace. In March alone, spot bitcoin ETFs combined for $111 billion worth of trading volume, triple the volume of January and February, according to Bloomberg Intelligence senior ETF analyst Eric Balchunas. The

In March, the iShares Bitcoin Trust (IBIT) reached $10 billion in assets faster than any ETF in history. It currently has $17 billion in AUM, second to the $23 billion Grayscale Bitcoin Trust ETF (GBTC), and $14.2 billion in net inflows.

This is the kind of momentum ETF issuers are jockeying to capitalize on with the next likely wave of spot crypto ETFs, but the SEC has made it clear it will not be just rubber-stamping spot crypto ETFs now that one version is already on the market.

New York-based BlackRock, the world's largest asset manager, filed its spot Ethereum ETF application in January. Boston-based Fidelity, which also offers a spot bitcoin ETF, filed its application late last month.

The SEC said that comments, which should refer to the file number SR-CboeBZX-2023-095 and that it would post on the agency's website.

Jeff Benjamin

| Contact: [email protected]

Jeff Benjamin is the wealth management editor at etf.com, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.

Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.

Based in North Carolina, Jeff is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.

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