ETF Approval Setback Amidst U.S. Government Shutdown Risk


Potential Government Shutdown Casts Shadow Over U.S. Financial Sector and SEC’s ETF Determinations; Ethereum Futures ETFs Await Green Light.

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In the event that Congress does not reach a consensus on a funding bill by September 30, the United States government could potentially experience a shutdown. Such a scenario carries notable implications for the financial sector, particularly with regard to the Securities and Exchange Commission’s (SEC) evaluation and approval of exchange-traded funds (ETFs).

NYDIG, a leading provider of Bitcoin-related services, has indicated that the duration of a government shutdown may vary, spanning from one to 35 days, contingent upon the political climate. This potential scenario could hinder the SEC’s ability to review and render decisions on numerous ETF applications, particularly those related to Bitcoin and Ethereum.

Uncertain Prospects for Bitcoin Spot ETFs

The SEC has postponed several determinations concerning spot Bitcoin ETFs. These ETFs would enable investors to engage in the purchase and sale of Bitcoin via a regulated platform. Prominent applicants in this context encompass BlackRock, Invesco, Bitwise, and Valkyrie.

The SEC encountered a delay just two weeks prior to the impending deadlines from October 16 to 19. This situation indicates that the regulatory agency is making preparations in anticipation of a possible shutdown. Consequently, the SEC is now confronted with a ultimate decision deadline in mid-March for these applications.

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Bloomberg ETF analyst James Seyffart anticipates the likelihood of comparable delays for other contenders, specifically Fidelity, VanEck, and WisdomTree. He also posits that the SEC might adopt a uniform approach for all ETFs by evaluating and rendering decisions on them concurrently.

Ethereum Futures ETFs Poised for Launch

Futures-based Bitcoin ETFs have already been introduced in the United States, affording investors the ability to monitor and capitalize on Bitcoin’s price fluctuations through regulated exchanges. Despite the ongoing awaiting approval of spot Bitcoin ETFs, these futures-based alternatives have garnered substantial popularity since their inception in October 2021, amassing billions of dollars in assets.

Multiple issuers have recently submitted applications to the SEC for the establishment of Ethereum ETFs, structured around futures. These ETFs would mirror the performance of Ethereum futures contracts traded on the Chicago Mercantile Exchange (CME), which commenced operations in February 2021.

The Securities and Exchange Commission is presently not considering spot Ethereum ETFs, and thus far, no issuer has submitted an application for such a product. Consequently, individuals interested in buying or selling Ethereum directly may encounter extended waiting periods compared to those who opt for futures-based products.

Market Response

Amid the uncertainty surrounding ETF approvals and the potential government shutdown, Bitcoin witnessed a minor decline of 0.38%, reaching a value of $26,933. In contrast, traditional assets registered losses on the same day. Notably, gold recorded a decrease of 0.96%, while overall stock markets experienced a decline, with the S&P 500 dropping by 0.27% and the Nasdaq Composite showing a marginal increase of 0.14%.

As per a recent report by Moody’s, a government shutdown could potentially negatively impact the U.S. credit rating. The rating agency underscores that such an occurrence would highlight the persistent difficulties in reaching bipartisan consensus on fiscal policy and cast doubts on policymakers’ ability to address more significant fiscal matters in the future.

Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.

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