BlackRock, Grayscale, Bitwise Update Forms, Ether ETF Approval Odds at 75%

Key Takeaway

• BlackRock, Grayscale, and Bitwise filed updated forms for spot ether ETFs, removing staking provisions to address regulatory concerns.
• Bloomberg analysts raised the approval odds for ether ETFs to 75%, leading to a 17% rise in ether and bitcoin hitting $71,000.
• Fidelity, VanEck, Franklin Templeton, Invesco Galaxy, and ARK 21Shares also amended their filings; Hashdex is yet to file.

Regulatory Optimism for Ether ETFs

The crypto market is abuzz with optimism as the U.S. Securities and Exchange Commission (SEC) appears to be moving closer to approving exchange-traded funds (ETFs) that invest directly in Ether. On Wednesday, BlackRock, Grayscale, and Bitwise filed amended 9b-4 forms with the SEC for their proposed spot Ether ETFs, removing provisions for staking Ether, which some believe was a regulatory roadblock. The amended BlackRock filing explicitly states, “Neither the Trust, nor the Sponsor, nor the Ether Custodian [...] nor any other person associated with the Trust will, directly or indirectly, engage in action where any portion of the Trust’s ETH becomes subject to the Ethereum proof-of-stake validation or is used to earn additional ETH or generate income or other earnings.”

This move follows a request from the SEC for the New York Stock Exchange and Cboe Global Markets to update their 19b-4 filings, which propose rule changes to allow these funds to trade. According to sources familiar with the matter, this suggests that the prospects for SEC approval may be rising, although a green light is not guaranteed. Updated documents were posted on Tuesday for ETFs from ARK 21Shares, Fidelity Investments, Invesco Ltd., Franklin Resources Inc., and VanEck.

Staking Scrubbed from Filings

In a significant development, Fidelity Investments updated its S-1 registration statement with the SEC for its proposed spot-Ether ETF, explicitly stating that it will keep the Ether it buys out of staking programs and will not invest in derivatives. Grayscale Investments LLC also removed staking language from its proposed spot-Ether ETF. Staking, the process of locking specific cryptocurrencies to support blockchain operations in exchange for rewards, has been a contentious issue for Ether, raising questions about whether the token should be treated as a security.

The increased activity among the SEC, investment firms, and exchanges comes ahead of a May 23 deadline for the regulator to approve or deny VanEck's application. Bernstein analysts Gautam Chhugani and Mahika Sapra noted, "Given the political ‘backroom’ drama, approval will be seen as significant regulatory relief for the sector." The Depository Trust and Clearing Corporation (DTCC) has started listing VanEck’s Ether ETF under the ticker symbol ETHV on its site, which some take as a positive sign.

Ether's Price Surge

Ether, the native token of the Ethereum blockchain, has surged approximately 23% this week, trading at around $3,780 as of 9 a.m. in Singapore on Wednesday. This rally follows Bloomberg Intelligence ETF analyst Eric Balchunas increasing his estimated probability of the ETF being approved by May 23 from 25% to 75%. Standard Chartered analyst Geoff Kendrick expects significant ETF-driven inflows to Ether, estimating that spot-Ether ETFs could lead to inflows of about $15 billion to $45 billion in the first 12 months after approval.

The SEC's previous approval of spot-Bitcoin ETFs in January, which attracted almost $13 billion in net inflows, has set a precedent that fuels this optimism. The batch of new US Bitcoin ETFs has amassed nearly $59 billion in assets since their launch on January 11, marking one of the most successful product category debuts in the industry’s history.