Chair Gary Gensler of the U.S. Securities and Exchange Commission (SEC) recently stated that the fate of exchange-traded funds (ETFs) linked to the cryptocurrency ether rests heavily on the responsiveness of issuers to the SEC’s inquiries. Although the SEC greenlit applications from Nasdaq, CBOE, and NYSE to list spot ether ETFs last month, the issuers must first obtain approval for their registration statements containing investor disclosures before trading can commence.
Gensler emphasized that ETF issuers are driven to address any concerns raised by the SEC, but the speed at which they address these concerns remains at their discretion. The interaction between the issuers and SEC officials during the approval process typically involves a considerable amount of dialogue and revision. The process of finalizing registration statements may take an indefinite amount of time, as Gensler declined to specify whether it could span weeks or stretch into months.
The unexpected approval of ether exchange filings by the SEC has drawn attention given the agency‘s previously cautious stance on cryptocurrency ETFs. Gensler shed light on a court case initiated by Grayscale Investments last year, which compelled the SEC to grant approval for spot bitcoin ETFs in January. The argument put forth by Grayscale contended that if the SEC sanctioned ETFs linked to bitcoin futures, it should also endorse spot bitcoin ETFs due to the high correlation between bitcoin futures and spot prices. Applying a similar logic, Gensler highlighted the correlation between ethereum futures and spot prices, indicating a rationale for approving ether products.
Reflecting on the SEC’s historical reluctance towards bitcoin ETFs over the past decade, Gensler acknowledged that the court’s ruling in favor of Grayscale prompted a shift in the regulatory approach. The decision to authorize spot bitcoin ETFs earlier this year signaled a departure from previous regulatory barriers. Gensler acknowledged the necessity of adapting to court rulings and incorporating market dynamics in shaping regulatory decisions.
The opening of the ETF market for cryptocurrencies like ether remains contingent on the outcome of ongoing discussions between issuers and the SEC. The shift in regulatory attitude towards cryptocurrency ETFs reflects a broader trend of embracing innovation while balancing investor protection. As the cryptocurrency landscape continues to evolve, it is crucial for regulators to adapt and respond to market developments in a timely manner.