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Grayscale Ethereum ETF

SEC Postpones Decision on Grayscale Ethereum ETF Staking Rule

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  • SEC extends deadline to decide on Ethereum ETF staking rule
  • No public comments received on NYSE Arca’s staking proposal
  • Grayscale proposal could reshape ETF yield with staking rewards

The U.S Securities and Exchange Commission (SEC) has extended its review of the proposed rule change on Grayscale’s Ethereum ETF. The proposal aims to offer staking features to Ether assets held by the Grayscale Ethereum Trust ETF and Grayscale Ethereum Mini Trust ETF. The Commission has extended the review process to June 1, 2025.

Ethereum ETFs Proposed Rule Change

On February 14, 2025, NYSE Arca submitted the proposal to the SEC under Section 19(b)(1) of the Securities Exchange Act. The proposed amendment aims to support staking of Ether assets held by Grayscale ETFs. On March 3, 2025, the Commission issued the notice for public feedback.

The proposed rule change did not receive comments from the public at the time of the review period. The initial 45-day review period would end on April 17, 2025. However, the SEC has extended the time to evaluate the proposal past the initial deadline.

The Commission announced the extension to allow more time for staff members to analyze regulatory and operational requirements as well as market implications. The proposal raises important questions about custodial management, validator operations, and returns from staking rewards. These factors must be analyzed properly to ensure market stability and protect investors.

Grayscale seeks to improve its Ethereum ETFs through a staking feature, which is connected to Ethereum’s proof-of-stake model. This modification will allow network contributors or the funds to earn rewards, which could enhance the returns for investors. NYSE Arca filed a proposal with the SEC to implement operational changes in the ETF structure.

SEC’s Jurisdiction Over Rule Change Proposals

The SEC has the power to approve or reject rule modifications as well as extend time limits for further review processes. The commission can extend the review process to 90 days to properly evaluate complex tasks. The Commission decided to extend its review duration for the Grayscale case.

Market analysts continue to monitor the SEC’s approach on crypto-linked financial products. The outcome of the review process could influence the evaluation of future applications on staking and decentralized finance protocols. A positive outcome will determine the future of Ethereum-based investment products.

The SEC has established June 1, 2025 as its new deadline to evaluate the market effects of its actions. However, this period of evaluation does not indicate approval or rejection status but provides more time to review the complete extent of the proposal. All procedures are conducted under the federal securities laws standards.

Grayscale Abandons Ethereum Futures Application

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Grayscale Investments, a prominent player in the cryptocurrency investment arena, is making significant strategic shifts, particularly concerning Ethereum. CEO Michael Sonnenshein recently announced a pivotal move during an event hosted by the Financial Times in London. The focus is now squarely on transitioning the world’s largest Ethereum trust into spot exchange-traded products.

Sonnenshein emphasized the organization’s commitment to spot products, stating that it aligns with their core principles. This decision follows Grayscale’s withdrawal of its application to the Securities and Exchange Commission (SEC) for an Ether futures exchange-traded fund (ETF), citing the saturation of futures products available to investors.

The landscape of Ethereum ETFs is fiercely competitive, dominated primarily by VanEck’s EFUT and ProShares’ EETH, which collectively capture over 90% of trading volume at launch. Sonnenshein clarified that filing for a product doesn’t guarantee its market availability, echoing the sentiment of cautious optimism in a rapidly evolving regulatory environment.

Grayscale’s successful legal battle with the SEC to convert its Bitcoin Trust into an ETF set a precedent for Bitcoin spot ETF approvals, paving the way for similar products from other asset managers like BlackRock and Fidelity Investments. With approximately $12 billion in net inflows, the attention has now shifted towards Ethereum ETF approvals.

Ethereum ETF Race

Grayscale, alongside other major players such as BlackRock, VanEck, and Fidelity, has applied to convert its Ethereum trust into a spot ETF. The upcoming decision on VanEck’s application by the SEC on May 23 will be closely watched by the industry as an indicator of regulatory sentiment.

In addition to pursuing spot ETFs, Grayscale has filed for a mini trust, offering a smaller fund option to cater to a diverse range of investors. This move underscores their commitment to accommodating various investment strategies and preferences.

However, analysts remain cautious about the prospects of SEC approval for spot Ether products. The regulatory ambiguity surrounding Ethereum’s classification as a security, coupled with potential political pressure, adds layers of uncertainty to the approval process.

As the cryptocurrency landscape continues to evolve, Grayscale’s strategic maneuvers underscore the complexities and challenges in navigating regulatory frameworks while striving for innovation and market access.

19b-4 Ethereum ETF Filing Axed: Grayscale’s Bold Move

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With its recent withdrawal of the 19b-4 filing for an Ethereum futures exchange-traded fund (ETF), Grayscale, the leading cryptocurrency asset manager, has stirred up the financial world. This unexpected move has puzzled many industry experts, sparking speculation about Grayscale’s motives and plans.

James Seyffart, a prominent ETF analyst, described the filing as a “Trojan horse,” suggesting that it was a strategic maneuver to prompt a response from the U.S. Securities and Exchange Commission (SEC), much like the circumstances that led to Grayscale’s victory in the GBTC lawsuit. Seyffart’s confusion reflects the uncertainty surrounding Grayscale’s motives, as he questioned why they didn’t simply force the SEC to make a decision on an ETH futures ETF.

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Geraci Foresees Legal Battle Over Ethereum ETF Denial

Nete Geraci, anticipating potential SEC resistance, predicted that Grayscale might resort to legal action if its spot Ethereum ETF application is denied. This sentiment is echoed by Nate Geraci, president of the ETF Store, who believes that the SEC is unlikely to approve spot Ethereum ETFs in May due to a lack of engagement with issuers. The SEC’s refusal to provide feedback further underscores the uncertainty surrounding Ethereum ETF approval.

Eric Balchunas, Bloomberg’s senior ETF analyst, characterized the SEC’s silence as potentially leading to further legal battles, should it reject numerous Ethereum ETF applications. Grayscale’s previous legal victory against the SEC in the Bitcoin ETF application process highlights the potential for litigation in the cryptocurrency ETF arena.

Despite speculation about potential legal action, Balchunas suggests that Grayscale’s withdrawal may indicate a reluctance to pursue another lawsuit against the SEC. However, the possibility of legal challenges remains, with Geraci proposing that Grayscale or other deep-pocketed ETF issuers could view legal battles as a marketing expense, positioning themselves as champions of crypto innovation.

In summary, Grayscale’s withdrawal of its Ethereum futures ETF filing has sparked debate and speculation within the cryptocurrency community. While some anticipate legal action against the SEC, others interpret the move as a strategic decision by Grayscale to navigate the complex regulatory landscape surrounding cryptocurrency ETFs. Only time will tell how this saga unfolds and its impact on the future of Ethereum ETFs.

SEC Delays Ethereum ETF Decision to May 2024: Bitcoin ETFs Anticipated in January

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The United States Securities and Exchange Commission (SEC) has decided to postpone its decision on several Ethereum (ETH) exchange-traded funds (ETFs) until May 2024. This move follows the agency’s decision to delay the consideration of the Hashdex Nasdaq Ethereum ETF and the Grayscale Ethereum Futures ETF.

SEC’s Ethereum ETF Postponement

The Hashdex Ether ETF is designed to encompass both spot Ether and futures contracts in its portfolio. Meanwhile, the Grayscale Ethereum Futures ETF is being regarded as a strategic move, often described as a “trojan horse,” aimed at pressuring the SEC into approving Grayscale’s conversion of its Ethereum Trust to a spot Ethereum ETF.

Bloomberg ETF analyst James Seyffart expressed his views on the matter in a tweet on November 15, stating that if the SEC were to approve Grayscale’s ETH futures ETF application, it could pave the way for the approval of its spot Ether ETF application. Conversely, a denial could lead to Grayscale arguing that the SEC is treating Bitcoin and Ether futures ETFs differently under the Securities Act of 1933.

Watch [the SEC] try to either approve and argue why this is different from spot. Or Deny and argue why 1933 act products are meaningfully different from 1940 act products. Both are bad for SEC [in my opinion]. Genius move.

According to the filing, the SEC has initiated proceedings to gather additional public input on whether these ETFs should be listed, further contributing to the delay. Additionally, the decision on the VanEck spot Ethereum ETF and the spot Ethereum ETF proposed by Cathie Wood’s ARK Invest and 21Shares has also been postponed.

Bitcoin ETFs: January 2024 Anticipation

Despite these delays and uncertainties surrounding Ethereum ETFs, analysts are still optimistic about the approval of Bitcoin (BTC) spot ETFs by early 2024. Bloomberg ETF analysts James Seyffart and Eric Balchunas anticipate that the SEC will greenlight a spot Bitcoin ETF in January 2024.

This positive outlook persists despite last-minute amendments being hastily added by applicants to their proposals. Seyffart pointed out that BlackRock’s recent spot Bitcoin ETF update, accepting the SEC’s cash redemption system, signifies a trend among applicants adopting a cash-only model.

Notable entities like ARK, Bitwise, and Valkyrie have already embraced this approach, while others like Grayscale and WisdomTree continue to include in-kind or cash options in their filings.

In December, finance lawyer Scott Johnsson predicted a broader industry shift towards the adoption of a cash creation and redemption model for ETFs, emphasizing the changing landscape and regulatory preferences within the cryptocurrency market.

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