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When an exchange-traded fund (ETF) tracking the cryptocurrency Ethereum could begin trading will depend largely on how quickly its issuer responds to questions from the U.S. Securities and Exchange Commission, Chairman Gary Gensler said on Wednesday.
Last month, the SEC approved applications from Nasdaq, CBOE and the NYSE for spot listing of an Ethereum ETF, a surprise win for the crypto industry, which had expected the SEC to reject the applications after growing frustrated with regulators during meetings with them.
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In this illustrated photo taken in Brussels, Belgium on Jan. 9, 2024, the seal of the U.S. Securities and Exchange Commission is displayed on a smartphone with Bitcoin on the screen in the background. (Photo Illustration: Jonathan Lahr/NurPhoto via Getty Images)
Before an ETF can begin trading, the SEC must approve the ETF issuer’s registration statement, which details disclosures to investors, a process that typically involves multiple rounds of back and forth between the ETF issuer and SEC staff.
“Registers will voluntarily respond to the comments they receive, but the extent to which they respond is really up to them,” said Gensler, who declined to say whether he thought the process would take weeks or months.
Gensler and agency officials have not previously commented on why the SEC appears to have reversed course and approved the Ethereum exchange’s application.
Gensler said Wednesday that a lawsuit filed last year by Grayscale Investments forced the SEC to approve a spot bitcoin ETF in January, which influenced the SEC’s thinking on ethereum products.
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Grayscale successfully argued that because Bitcoin futures prices are highly correlated with spot prices, the SEC should also approve a spot Bitcoin ETF since it previously approved an ETF linked to Bitcoin futures.
The Bitcoin symbol is seen at the Exchange Traded ETF Conference in Miami Beach, Florida, in February 2024. (FOX Business/Fox News)
Gensler said the cases are similar because Ethereum futures have been trading since last year. “SEC staff looked at these[Ethereum]filings and looked at various correlations, and the correlations are relatively similar to the correlations in the Bitcoin space,” Gensler said.
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After the court ruled in Grayscale’s favor last year, the SEC approved a spot Bitcoin ETF in January. Gensler acknowledged the court’s decision in a statement at the time, adding that he felt approving the product was “the most sustainable path forward.”
A neon sign indicating that bitcoin is accepted inside the Parallelipolis Project venue, an organization that combines art, social sciences and modern technology, in Prague, Czech Republic, Friday, Jan. 5, 2024. Bitcoin is (Milan Jaros/Bloomberg via Getty Images/Getty Images)
The SEC has rejected a bitcoin ETF for a decade. “The courts have ruled differently. We’ve adapted,” Gensler said.
Still, he added that he continues to believe the cryptocurrency industry is “full of fraud, scams and conflict.”
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