Crypto: The SEC's silence, a major obstacle to the approval of Ethereum ETFs

As the crypto industry eagerly awaits the green light from the SEC for Ethereum Spot ETFs, Bloomberg’s star analyst Eric Balchunas rings the alarm bell. The silence of the American regulator regarding potential fund issuers bodes ill, according to him.

A Radio Silence Open to Multiple Interpretations

The approval process for Ethereum ETFs by the Securities and Exchange Commission (SEC) appears to be at a standstill. This is at least the concern the alarming silence of the American securities watchdog suggests, just weeks away from the final deadline.

A sentiment shared by Eric Balchunas, Bloomberg’s renowned ETF analyst, who believes the chances of a green light have currently dwindled to only 35%, down from 50% previously.

According to Mr. Balchunas, the lack of communication 73 days before the final verdict is a bad sign. “The SEC needs to make comments, and issuers have to try to correct them. It’s quite a long process,” he emphasizes.

This radio silence is in contrast with the usual process, where the SEC actively engages with issuers to refine their proposals. “The SEC usually makes comments and issuers strive to correct them. They might have to refile their applications and might even want to organize a few meetings – it’s quite a long process,” the analyst explained in an interview with Cointelegraph.

For Mr. Balchunas, the race for Ethereum ETFs is the “opposite” of the scenario experienced with Bitcoin. “It’s just different. Whether it’s our sources, actual public documentation, or our gut feeling, everything positively nourished each other for Bitcoin. We feel it’s the opposite for Ether,” he laments.

Ethereum, a Security in the Eyes of the SEC Chairman?

Beyond the SEC’s silence, the stance of its chairman Gary Gensler on Ether could also sway the decision. According to Eric Balchunas, Mr. Gensler still views Ether as a security, as opposed to Bitcoin, which he regards as a commodity.

This perspective could dampen the regulator’s appetite for approving an Ethereum ETF, especially after the mixed political feedback following the approval of Bitcoin ETFs and the legal defeat to Grayscale in August 2023. Gensler might balk at going through it all over again.

“Ultimately, Mr. Gensler believes Ether is a security. He wouldn’t want to approve it if he didn’t think it was a commodity like bitcoin,” analyzes Mr. Balchunas. This principled stance, coupled with a desire not to expose oneself again, might explain the SEC’s current hesitancy.

In summary, the SEC’s radio silence on Ethereum spot ETFs is alarming observers, like Eric Balchunas who has downgraded the likelihood of approval. Between lack of communication, Gary Gensler’s stance, and regulatory inconsistencies, the hurdles seem to be mounting. Nevertheless, for many, the question is not if an Ethereum ETF will emerge, but when. The November 2024 presidential elections could, in this respect, be pivotal.