The U.S. Securities and Exchange Commission (SEC) has deferred its decision on the applications by financial firms Grayscale Investments and BlackRock to launch spot ether exchange-traded funds (ETFs). This action reflects the SEC’s reluctance to back spot crypto ETFs after recently approving a batch of spot bitcoin ETFs.

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• SEC postpones the decision on converting Grayscale and BlackRock’s Ethereum products into spot ether ETFs.
• The regulatory body seeks public input on Ethereum’s unique attributes, including its proof of stake mechanism and control concentration risks.
• The delay follows a pattern of SEC caution with spot crypto ETFs, despite recent approvals of bitcoin ETFs.

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SEC Defers Verdict on Spot Ether ETF Proposals by Grayscale and BlackRock

Grayscale Investments, which currently operates the Ethereum trust (ETHE), faces a delay in its efforts to convert this product into an ETF. This hesitation by the SEC mirrors the setback experienced by BlackRock’s bid for a comparable spot ether ETF, which was also put on hold one day earlier.

The SEC’s cautious approach is consistent with its historical stance on spot crypto ETFs. Before evaluating prior spot bitcoin ETFs, regulators needed applicants to provide full, comprehensive documents to answer certain questions. It is not yet clear whether Grayscale and BlackRock have had similar in-depth interactions with the SEC regarding their ETFs.

The SEC also asked for public comments on a new public filing concerning several vital issues. The questions do not get out of the shadow of the first riddle—whether the logic of approval of bitcoin ETFs also applies to ether ETFs—but unique issues are raised here about Ethereum’s proof of detent mechanism and a concentration of power. Spot and futures market relationships, along with the strategic significance of the CME futures market due to its size, are issues the SEC is looking at, mirroring questions posed during the examination of bitcoin ETFs. 

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