The SEC has released comments on Grayscale, Fidelity, and Bitwise’s applications to launch a spot Ethereum exchange-traded fund (ETF).
This notice applies to proposed rule changes aimed at allowing two exchanges (Cboe BZX and NYSE Arca) to list and trade shares of the three funds.
Comments will remain public for 21 days after publication in the Federal Register.
This step is routine in the ETF approval process and mirrors the approach used for spot Bitcoin ETF applications, which previously encouraged feedback from U.S. citizens and organizations.
market correlation
Each notice discusses issues expected to impact the SEC when it comes time to approve or reject the proposed spot Ethereum ETF.
Most importantly, the bulletin discusses the correlation between ETH futures and ETH spot markets and whether the spot ETH market is significant relative to the futures ETH market. The correlation is relevant because the SEC previously approved a futures ETH ETF.
NYSE Arca and Grayscale cited Coinbase’s analysis demonstrating correlation and showing that fraud and manipulation are unlikely to occur in the spot ETH market. The companies also stated that, contrary to the SEC’s claims, the Investment Company Act of 1940 does not provide relevant protections that would allow it to reject certain spot cryptocurrency ETFs.
Cboe and Fidelity argued that their proposals and analysis demonstrate that the spot ETH market is of adequate size. NYSE Arca and Bitwise cited their analysis for this purpose.
The notice also seeks comment on other issues, including fund management, creation and repayment models, and sponsor fees. Requests for comment are routine and do not indicate whether the fund is likely to receive approval.
Ethereum ETF
The request for comment follows a history of delayed decisions by the SEC regarding a spot Ethereum ETF. The participation of famous fund managers such as Grayscale, Fidelity, and Bitwise highlights the growing importance and interest in cryptocurrency-based financial products among traditional investment companies.
The plan, led by three fund managers, aims to establish a spot ETH ETF, allowing investors to purchase stocks that mirror the price of Ethereum. There is strong momentum to secure similar regulatory approval for Ethereum-based products following the SEC’s approval of 11 Bitcoin ETFs in January, which saw significant inflows and popularity.
In particular, Coinbase held discussions with the SEC last week regarding Grayscale’s proposed Ethereum ETF. Grayscale aims to convert the existing Ethereum trust into a spot ETH ETF. This is a move that Coinbase publicly supported in a recent presentation to regulators.
The push for the Ethereum ETF comes amid mixed market sentiment. The SEC’s approval of a spot Bitcoin ETF marks a significant milestone, but analysts remain divided on the prospects for an Ethereum ETF.
Some speculate that the SEC may delay approval to temporarily separate Bitcoin and Ethereum products. Nonetheless, companies such as Standard Chartered have expressed optimism, expecting SEC approval by May.