The U.S. Securities and Exchange Commission (SEC) has asked aspiring ether exchange-traded fund (ETF) exchanges to update 19b-4 filings ahead of a key deadline this week. This request, while not a guarantee of approval, suggests progress is being made in the Ether ETF filing process.
Accelerated Review by SEC
The SEC had previously been expected to reject the ether ETF filings. However, the exchanges that want to list and trade shares of spot ether (ETH) ETFs are now being asked by regulators to update key filings related to these products on an accelerated basis. This move indicates that the SEC may be considering approval of these applications ahead of a key deadline this Thursday.
Uncertainty Remains
Despite this progress, there is no certainty that the ETFs will be authorized. Would-be issuers also need their S-1 applications approved before the products can begin trading. The SEC could take an indefinite amount of time to approve the S-1 documents, as it is not tied to a specific deadline.
Optimism Among Applicants
One company in talks with the SEC mentioned feeling optimistic about being on the right track for approval, a significant change from their previous perception that the SEC was dragging its feet. This sentiment was shared by Bloomberg Intelligence ETF analysts Eric Balchunas and James Seyffart, who raised their odds for the approval of a spot ether ETF to 75% from 25% after hearing favorable chatter. However, they later clarified that these odds pertained to the 19b-4 approvals.
Key Decisions and Market Reactions
The SEC is expected to make a decision on the VanEck spot ether ETF on May 23rd. Additionally, the SEC has been investigating whether ether, the chief native asset to the Ethereum blockchain, is a security. This inquiry followed Ethereum’s transition from a proof-of-work to a proof-of-stake consensus mechanism. If ether is deemed a security, this could be a reason for the regulator to reject the spot ether ETF applications.
Prometheum’s Role
A recent development at Prometheum, a special-purpose broker, may provide insight into the SEC’s stance. Prometheum announced it had soft-launched its ether custody service and intends to launch custody and trading services for other digital assets that are treated as securities in the U.S., not commodities.
Market Impact
Following these regulatory developments, ether (ETH) surged 17% to over $3,600, reflecting increased optimism about the likelihood of ETF approval. The CoinDesk 20, tracking the largest digital assets, rose nearly 8% amid positive regulatory progress on Ether ETFs. The market’s expectation of future volatility, as indicated by the ether implied volatility curve, flattened as traders heavily bought $4000 calls for May 2024.
The SEC’s request for accelerated updates to 19b-4 filings for ether ETFs suggests potential progress towards approval. However, with the need for S-1 application approvals and ongoing inquiries into ether’s classification, uncertainty remains. The crypto market, nonetheless, has responded positively, with significant price increases and heightened trading activity reflecting renewed optimism.
