Grayscale Investments and Bitwise Asset Management have decided to put their plans for ETH futures ETFs on hold. This decision comes after the U.S. Securities and Exchange Commission (SEC) expressed concerns about the liquidity of ETH futures and how they should be classified, whether as a security or a commodity.
Grayscale Investments and Bitwise Asset Management, two companies that manage cryptocurrency assets, have decided to temporarily delay their plans to introduce exchange-traded funds (ETFs) for Ethereum (ETH) futures. This decision is said to have been influenced by the U.S. Securities and Exchange Commission (SEC), as per sources familiar with the situation.
The concerns raised revolve around the availability of enough buyers and sellers for Ethereum futures and the uncertainty regarding whether Ethereum should be considered a type of investment or a tradable commodity.
Grayscale, a well-known company that offers the Grayscale Bitcoin Trust, has reportedly changed its plans and decided not to introduce an Ethereum futures product as originally intended. This decision seems to have influenced other companies in the same industry, as suggested by information found in SEC filings and insider sources.
We take seriously the prospect that our efforts to convert $GBTC to a Spot #Bitcoin ETF could advance national conversations on digital assets.
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— Grayscale (@Grayscale) May 18, 2023
SEC representatives have indicated that they are currently not ready to approve these products. This shows that they are hesitant to proceed until there is more clarity and understanding in the cryptocurrency space.
Direxion, a fund manager that offers around 80 ETFs in the United States, has withdrawn its proposal for an ETH Strategy ETF. This decision was made according to a recent filing submitted to the SEC.
The SEC has reportedly been advising multiple issuers to withdraw their public filings for ETH futures ETFs and engage in private discussions regarding their proposals.
Bitwise, another company, has also withdrawn its application for an Ethereum Strategy ETF. The ETF would have primarily focused on cash-settled ETH futures contracts on the Chicago Mercantile Exchange (CME).
Afterward, Grayscale made changes to its filing, stating that it would proceed with ETF plans but exclude the previously proposed Ethereum Futures ETF.
Other firms, including Valkyrie Investments and Roundhill Investments, have registered for ETH futures ETFs, but they have not provided much information about their plans moving forward.
While the SEC approved bitcoin futures ETFs last year, there are concerns about the readiness of the ETH futures market for a similar ETF. Matthew Sigel from the fund group VanEck has expressed concerns about the limited liquidity in the CME ETH futures market.
In addition to liquidity concerns, the SEC may also be facing challenges regarding the classification of ETH. Bryan Armour from Morningstar mentioned that whether ETH is considered a commodity or a security is a major point of disagreement for the SEC.
The SEC’s stance shows that there is a need for clearer guidelines in the rapidly growing field of cryptocurrency. They are taking their time to carefully assess each proposal related to crypto ETFs, as this is a new area that requires thorough evaluation.
Important: This article is intended solely for informational purposes. It should not be considered or relied upon as legal, tax, investment, financial, or any other form of advice.
