SEC Delays Decision On BlackRock’s Proposal

The speculation surrounding the approval of an Ethereum (ETH) spot ETF (exchange-traded fund) has created expectations among crypto investors. After the historic approval and launch of Bitcoin spot ETFs in the US in January, all eyes have turned to the May 23^rd deadline.

In the most recent development, the US Securities and Exchange Commission (SEC) has delayed the decision to approve or deny BlackRock’s Ethereum ETF proposal for a second time. Instead, the US regulator is now seeking the public’s feedback concerning the investment products based on the second largest cryptocurrency.

BlackRock’s iShares Ethereum Spot ETF Yet To Be Approved

BlackRock filed for an ETH spot ETF back in November of 2023. The firm’s proposal for its iShares Ethereum Trust is designed to track the price performance of Ether closely.

Fidelity, another giant in the asset management industry, submitted its proposal for an Ethereum spot ETF the same month as BlackRock. Other firms like Franklin Templeton, Grayscale, and Ark Invest have also filed for the exchange-traded product (ETP) and are awaiting approval by the SEC.

In January, the US regulatory agency delayed the decision timeline on BlackRock’s proposal to March. The commission argued that it found it “appropriate” to designate a longer examination period to consider the proposed rule change to list and trade shares of the iShares Ethereum Trust and the “issues raised therein.”

Now that March has come, the US regulator delayed its decision again. The Monday filing shows that the SEC is “instituting proceedings under Section 19(b)(2)(B) of the Act12 to determine whether the proposed rule change should be approved or disapproved.”

The institution of proceedings, as the document explains, does not indicate that the regulator has reached a decision. The SEC considers this measure appropriate given “the legal and policy issues raised by the proposed rule change.”

The Commission is instituting proceedings to allow for additional analysis of the proposed rule change’s consistency with Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices” and “to protect investors and the public interest.

US SEC Asks For Public Feedback

The regulatory agency has decided to seek the public’s feedback, asking commenters to address the “sufficiency of the statements in support of the proposal (…) in addition to any other comments they may wish to submit about the proposed rule change.”

Regarding the solicited feedback, the document lists six main concerns the interested commenters might specifically submit their view on and appropriate data to support it.

Some of the questions in the document include whether the arguments presented by the exchange to support the listing of Bitcoin ETPs apply equally in the case of Ether; and whether Ether is susceptible to fraud or market manipulation due to the Ethereum ecosystem’s particular features like “concentration of control or influence by a few individuals.”

The timeframe for comment submission goes from the day of publication in the Federal Register to 21 days after publication. The filing of a rebuttal to another person’s public submission must be sent up to 35 days after the publication date in the Federal Register.

Analyst Views On The Approval

Previously, ETF experts like James Seyffart and Eric Balchunas have expressed their optimistic view on Ethereum ETFs approval in May of this year. As reported by Bitcoinist, Seyffart stated after the January delays that a subsequent postponement in March was most likely to happen.

I’m not saying for certain that the spot ETH ETF won’t be approved by May 23.

I’m just saying that the legal issues and policy environment in DC make denial (or an SEC request to withdraw) more likely than general sentiment suggests.

“Blackrock always wins” is a lazy bull take.

— Jake Chervinsky (@jchervinsky) March 3, 2024

Jake Chervinsky, Lawyer and CLO of Variant, recently shared his view. Chervinsky doesn’t rule out the possibility of approval by May 23.

However, he sees the legal issues and the policy environment in DC tipping the scale towards the denial or withdrawal request side. The layer considers that, in the case of a withdrawal request and a potential refusal from the asset management firm, the SEC would then write a denial order explaining its reasons. But “Either way, no ETF.”

ETH is trading at $3,762.61 in the 1-day chart. Source: TradingView.com

Featured image from Unsplash.com, Chart from Tradingview.com