The U.S. Securities and Exchange Commission (SEC) has announced a delay in its decision regarding Franklin Templeton’s proposed spot Ethereum ETF. The deadline has been extended to June 11, 2024, causing uncertainty about the future of this financial product. The proposed ETF, filed in February, aims to track the price of ether and would use Coinbase Custody Trust Company and the Bank of New York Mellon as custodians. The SEC has cited the need for additional time to evaluate the proposed rule changes and the complex issues surrounding the classification of Ethereum as reasons for the delay.
The decision to extend the review period mirrors a similar delay for Grayscale’s Ethereum Trust proposal, which seeks to convert into a spot ether ETF. This delay comes amidst a surge in applications for spot cryptocurrency ETFs, with industry giants like Fidelity and BlackRock joining the race. Analysts had initially anticipated a decision in May, but recent SEC delays have tempered expectations. Bloomberg analyst Eric Balchunas revised his approval likelihood estimate from 70% to 35%, reflecting growing uncertainty within the market.
Despite the regulatory hurdles and dimmed expectations, the market’s appetite for cryptocurrency investment vehicles remains strong. The SEC’s earlier approval of spot Bitcoin ETFs in January 2024 led to a significant influx of capital, with these ETFs attracting a cumulative net inflow of $12.39 billion. The SEC has also initiated a period of public comment regarding spot Ethereum ETFs, seeking feedback on proposals from Bitwise Ethereum Trust, Fidelity Ethereum Fund, and Grayscale Ethereum. SEC Chair Gary Gensler has cautioned against interpreting this as endorsing crypto assets or their regulatory status.
The likelihood of a spot Ethereum ETF approval seems to have considerably waned, according to industry figures like VanEck CEO Jan van Eck and CoinShares CEO Jean-Marie Mognetti. Van Eck has voiced skepticism about approval prospects, while Mognetti predicts a prolonged period of inaction from the SEC on pending applications. Democratic Senators Laphonza Butler and Jack Reed have urged SEC Chair Gensler to exercise caution in approving crypto-based ETFs, citing potential risks to investors and concerns about inadequate regulatory safeguards. The current climate surrounding spot Ethereum ETFs is uncertain, with delays in decision-making and shifting expectations within the industry.
