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SEC Delays Decision on BlackRock’s Ethereum ETF

The U.S. Securities and Exchange Commission (SEC) has postponed its decision on whether to approve or reject BlackRock’s proposed spot Ethereum exchange-traded fund (ETF) until March 10, 2024.

BlackRock, the world’s largest asset manager, filed for the BlackRock iShares Ethereum Trust with Nasdaq on Nov. 21, 2023. The trust would hold Ethereum, the second-largest cryptocurrency by market capitalization, and track its price performance.

The SEC was initially expected to make a decision by Jan. 25, 2024, but it invoked its statutory right to extend the review period for up to 90 days. The SEC stated that it needed more time to consider the proposed rule change and solicit public comments.

So far, the SEC has not received any comments on BlackRock’s Ethereum ETF proposal, which is surprising given the high level of interest and debate surrounding crypto ETFs. In contrast, BlackRock’s spot Bitcoin ETF proposal, which was filed in June 2023, attracted about 15 comments within two months.

BlackRock’s Ethereum ETF is one of several crypto ETF applications pending before the SEC, which has yet to approve any such product in the U.S. market. Crypto ETFs are seen as a way to provide investors with easier and safer access to digital assets, as well as to boost their legitimacy and adoption.

However, the SEC has expressed concerns about the potential risks and challenges of crypto ETFs, such as market manipulation, volatility, custody, liquidity, and valuation. The SEC has also indicated that it prefers ETFs that are based on crypto futures contracts rather than spot prices, as futures are regulated by the Commodity Futures Trading Commission (CFTC).

BlackRock’s Ethereum ETF is a spot-based product, which may face a higher hurdle for approval than futures-based ones. However, some analysts and market participants are optimistic that the SEC will eventually greenlight a crypto ETF in 2024, as the demand and innovation in the space continue to grow.

According to Polymarket, a prediction market platform, there is a 54% chance that the SEC will approve a crypto ETF by May 31, 2024. Bloomberg ETF analyst Eric Balchunas has a more bullish outlook, estimating a 70% chance of approval.

If approved, BlackRock’s Ethereum ETF would be the first of its kind in the U.S., and likely have a significant impact on the crypto market and industry. Ethereum, which currently trades at around $3,000, has gained more than 400% in the past year, driven by the growth of decentralized applications, smart contracts, and non-fungible tokens (NFTs) on its network.

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