Ether ETF Hopes Rekindled by Wave of App Updates

(Bloomberg) — Crypto markets are growing increasingly optimistic about regulatory approval for U.S. exchange-traded funds investing directly in Ether, amid a flurry of activity among potential issuers, exchanges and l securities regulator.

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The Securities and Exchange Commission has requested that the New York Stock Exchange and Cboe Global Markets update so-called 19b-4 filings that propose rule changes to allow planned funds to be traded, according to people familiar with the matter who asked not to be identified since. the matter is private.

That’s a sign that prospects for SEC approval could be increasing, although the green light is by no means guaranteed, one of the sources said. The agency also sought to have all filings resubmitted in the same language, one of the people said.

Updated documents were duly released later on Tuesday, including for ETFs of ARK 21Shares, Fidelity Investments, Invesco Ltd., Franklin Resources Inc. and VanEck.

Cleared staking

Meanwhile, Fidelity Investments on Tuesday updated its S-1 registration statement with the SEC for its proposed spot-Ether ETF.

Among other things, the issuer said it will keep Ether it purchases from programs rewarding blockchain maintenance – known as staking in industry lingo – and that it will not would not invest in derivative products.

Grayscale Investments LLC has also cleaned up the staking language for its proposed spot-Ether ETF. Staking is a hot-button issue for Ether as it raises the question of whether the token should be treated as a security.

The increased activity from the SEC, investment companies and exchanges comes ahead of a May 23 deadline for the regulator to approve or deny an application from VanEck.

“Given the political drama behind the scenes, the approval will be seen as significant regulatory relief for the sector,” Bernstein analysts Gautam Chhugani and Mahika Sapra wrote in a note Tuesday. “And before the US presidential elections, we would expect a more flexible regime. »

Aether Rally

Ether is the native token of the Ethereum blockchain, the most important commercial highway in crypto. The token has surged about 23% this week and was trading at around $3,780 as of 9 a.m. Wednesday in Singapore.

“We expect significant ETF inflows into ETH, as has been the case with BTC ETFs since their approval,” Standard Chartered analyst Geoff Kendrick wrote in a recent note. Kendrick estimates that spot-Ether ETFs can generate inflows of approximately $15 billion to $45 billion in the first 12 months after approval.

The story continues

In January, the SEC faced a similar deadline for spot-Bitcoin ETFs and ended up approving 10 such funds simultaneously. These approvals were also preceded by a wave of administrative changes requested by the regulator. The lack of a similarly robust interaction with the regulator before Monday led some issuers to prepare for denials, Bloomberg reported on May 17.

The batch of new U.S. Bitcoin ETFs has attracted nearly $13 billion in net inflows to amass nearly $59 billion in assets since their Jan. 11 launch, and they have been hailed as one of the premier categories of most successful products in the history of the sector. On April 30, Bitcoin and Ether spot ETFs also began trading in Hong Kong and currently manage $294 million in assets.

Read more: Hong Kong Shaky Crypto ETF Launches Dent Global Hub Aspirations

Discount on funds

Another sign that approval speculation is growing is the Grayscale Ethereum Trust (ticker ETHE), which Grayscale Investments hopes to convert into an ETF if the SEC approves.

The fund’s discount to its underlying Ether holdings narrowed to less than 7% from Friday’s 20.5% and as much as 56% last year, according to data compiled by Bloomberg. A similar trend was seen in January before the SEC approved the conversion of Grayscale’s Bitcoin Trust, which now trades on par with its underlying asset.

Ether prices began to take off on Monday after Bloomberg Intelligence ETF analyst Eric Balchunas increased his estimated probability that the ETF would be approved by May 23 from 25% to 75%.

An SEC spokesperson said the agency does not comment on individual filings. Spokespeople for NYSE, Nasdaq and Cboe declined to comment. Grayscale did not immediately return a request for comment.

(Updated with latest filings in fourth paragraph.)

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