Crypto

Gensler Hints at SEC's Ether ETF Decision, Market Awaits Approval

SEC's Ether ETF Decision Could Lead to $15-$45 Billion Inflows, Analysts Raise Approval Odds to 75%

By Athena Xu

5/23, 10:52 EDT
Bitcoin / U.S. dollar
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Key Takeaway

  • SEC Chair Gary Gensler advises to "stay tuned" on the decision for ether (ETH) ETFs, indicating ongoing deliberations.
  • The SEC has asked exchanges to refile spot ether ETF applications with universal language, increasing approval likelihood.
  • Gensler reiterates opposition to the crypto bill and emphasizes the need for better disclosures from token operators.

SEC's Ether ETF Decision Looms

The cryptocurrency market is on edge as the U.S. Securities and Exchange Commission (SEC) nears a decision on the approval of spot Ether (ETH) exchange-traded funds (ETFs). SEC Chair Gary Gensler, speaking at an Investment Company Institute event in Washington, D.C., declined to provide specifics on the agency's stance but advised observers to "stay tuned." Gensler reiterated that the SEC's approach is guided by legal frameworks and court interpretations, referencing the D.C. Circuit Court of Appeals' decision that influenced the agency's pivot on spot Bitcoin (BTC) ETFs earlier this year.

The SEC has recently requested exchanges supporting spot Ether ETF applications to refile their 19b-4 forms with standardized language. This move, coupled with updated S-1 forms from companies like Fidelity and Grayscale, suggests increased engagement from the SEC. However, the agency's discomfort with the idea of Ether ETF issuers staking assets remains a significant hurdle. Industry participants believe these developments increase the likelihood of ETF approval, though it is not guaranteed.

Market Reaction and Price Movements

The anticipation of the SEC's decision has led to significant volatility in the crypto markets. Bitcoin (BTC) dropped below $68,000 from around $70,000 earlier in the day, marking a nearly 3% decline over the past 24 hours. Ether (ETH), which had surged to its highest price since mid-March at above $3,900, fell to near $3,700 but remained in the green over the past 24 hours. The broader digital asset market also felt the impact, with the CoinDesk 20 Index (CD20) declining over 2%. Major altcoins like Dogecoin (DOGE), Avalanche's native token (AVAX), Shiba Inu (SHIB), and Chainlink (LINK) all fell more than 4% within an hour.

The sell-off was exacerbated by a fresh S&P Purchasing Managers' Index report indicating a robust U.S. economy, which drove a surge in the dollar and dampened expectations for interest-rate cuts. This broader market reaction also saw the S&P 500 fall 0.6% from its opening price. Additionally, a large ETH sell order from trading firm Symbolic Capital Partner, which sold 6,968 ETH worth $27.4 million within a minute, may have triggered the initial decline.

Optimism Amid Regulatory Scrutiny

Despite the market turbulence, there is growing optimism about the potential approval of Ether ETFs. The SEC's request for updated filings and the removal of staking provisions from proposals by major firms like BlackRock, Grayscale, and Bitwise indicate a possible shift in regulatory stance. Fidelity, VanEck, Franklin Templeton, Invesco Galaxy, and ARK 21Shares have all filed similar amendments, removing staking language from their proposals. The Depository Trust and Clearing Corporation (DTCC) has even started listing VanEck’s Ether ETF under the ticker symbol ETHV, which some interpret as a positive sign.

Bloomberg analysts Eric Balchunas and James Seyffart have increased their estimated probability of ETF approval from 25% to 75%, citing the flurry of paperwork amendments and the SEC's recent engagement. This optimism has driven Ether prices up by about 23% this week, with the token trading at approximately $3,780 as of Wednesday morning in Singapore. Standard Chartered analyst Geoff Kendrick estimates that spot-Ether ETFs could lead to inflows of $15 billion to $45 billion in the first 12 months post-approval.

Management Quotes

  • Gary Gensler, Chair of the U.S. Securities and Exchange Commission:

    "I don't have anything on this particular filing."
    "We do it within the law and how the courts interpret the law, and that's what I'm deeply committed to."
    "[The] DC Circuit took a different view, and we took that into consideration and pivoted."
    "We'll continue to engage. It's just a field where the token operators – without prejudging any one of them – aren't making the disclosures that investors really could benefit from and are required by law."
    "We've seen leaders in this field find themselves on a pathway to jail or extradition."
    "The crypto that these companies have said they took as custody actually because part of the bankruptcy estate... That's what we were addressing back in 2022."