SEC delays low expectations for ETF approval by May despite backlog of additions

The U.S. Securities and Exchange Commission has delayed the approval process for several prospective exchange-traded funds (ETFs), recent regulatory filings show.

The delays are impacting proposals from investment firms including VanEck, Ark Invest, Hashdex and Grayscale – which has added a proprietary component to its ETH ETF app alongside Fidelity – sparking discussions about the future of cryptocurrency ETFs in the US.

Lower odds of approval

Bloomberg ETF analyst James Seyphart, who has been closely monitoring developments, Express the transformation From his previously cautiously optimistic forecast regarding the approval of Ethereum ETFs.

He noted that the SEC's lack of engagement in Ethereum-specific issues contrasts sharply with its approach to Bitcoin ETFs the previous fall, dampening hopes for a positive outcome by the crucial May 23 deadline.

Likewise, Eric Balchunas recently noted that the absence of bullish signals and sources that existed prior to Bitcoin ETF approvals significantly reduces the chances of a positive decision for Ethereum ETFs, estimating the odds at 35%.

The conversation extended beyond the ETF's delays, and touched on the broader regulatory environment for cryptocurrencies. Some have suggested that the SEC might insist on a court order before approving Ethereum ETFs, citing potential differences between Ethereum and Bitcoin in terms of their classification.

However, Seyvart disagreed with the idea that Ethereum could be classified as a security, a classification that could fundamentally affect its regulatory treatment.

The discussion also touched on the scope of potential outcomes and strategies. Seyffart speculated about the future of the Grayscale Ethereum futures product and its implications for potential legal challenges against SEC decisions.

Staking in ETFs

Meanwhile, both Fidelity and Grayscale have added modifications to their ETF applications to include a staking component.

Staking, a key aspect of Ethereum's Proof of Stake (PoS) model, involves locking digital assets to support the network's security and functionality, providing participants with rewards in the form of additional cryptocurrencies.

Grayscale's proposal, like Fidelity's, would allow an ETF to allocate a portion of its holdings to storage through selected providers, potentially including affiliates. The move is designed to explore income generation possibilities within a regulated financial framework, as the ETF is expected to receive Ether tokens as network rewards, which could be considered income for the fund.

However, this addition comes amid increasing scrutiny from US lawmakers, who recently urged the Securities and Exchange Commission to halt approval of new cryptocurrency-related ETFs due to concerns about investor risks.

As the May 23 deadline approaches, the cryptocurrency community remains on edge, awaiting further developments.

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