The US Securities and Exchange Commission (SEC) has postponed its decision on approving options trading for several spot Ethereum exchange-traded funds (ETFs). Major financial firms like BlackRock, Grayscale, and Bitwise have been kept waiting because of this.
This comes shortly after the regulator approved options trading for BlackRock’s Bitcoin ETF, signalling a cautious approach toward similar Ethereum-based financial products.
The recent decision, revealed on 23 September, affected proposed Ethereum ETFs including BlackRock’s iShares Ethereum Trust (ETHA), Bitwise’s Ethereum ETF (ETHW), and two Grayscale offerings: the Ethereum Trust (ETHE) and the Ethereum Mini Trust (ETH).
Originally, the SEC was expected to make a decision by 26 and 27 September 2024. However, they have now moved these deadlines to 10 and 11 November 2024.
The delay is part of a process allowed under Section 19(b)(2) of the Securities Exchange Act, which permits the SEC to take more time if they feel further evaluation is needed.
In the case of BlackRock’s iShares Ethereum Trust, the SEC said it needed “sufficient time to consider the proposed rule change”.
In an official statement, the SEC wrote, “The Commission finds it appropriate to designate a longer period within which to take action…so that it has sufficient time to consider the proposed rule change”.
BlackRock initially submitted its proposal to the SEC in July 2024, working through the Nasdaq ISE exchange. Similar filings were submitted by Bitwise and Grayscale through NYSE American LLC.
Growing interest in Ethereum options trading
The delay comes as more investors show interest in options trading for cryptocurrencies, especially after the SEC approved options trading for Bitcoin ETFs, including BlackRock’s iShares Bitcoin Trust (IBIT). This approval signals a shift toward more advanced investment products in the crypto world.
Options trading allows investors to speculate on price movements or protect themselves against potential losses. In other words, it gives traders more flexibility, especially in markets that can be unpredictable.
The Executive Vice President of CBOE Global Markets, Catherine Clay, stressed this point, saying, “It offers risk management and downside protection for crypto investors”.
Despite the growing demand, the SEC is still holding off on approving options trading for Ethereum ETFs. This is likely due to the complexity of these financial products and the need to thoroughly assess the potential risks and impacts on the broader market.
The approval of Bitcoin ETF options, while significant, came with strict conditions to prevent market manipulation.
Performance of ETH ETFs and market trends
The goal of these Ethereum ETFs is to simplify investing in the cryptocurrency without requiring investors to directly hold Ethereum. Nasdaq ISE’s proposal explains,
“The Shares have been designed to remove the obstacles represented by the complexities…involved in a direct investment in Ether.”
In other words, the ETFs are meant to make it easier for investors to gain exposure to Ethereum while avoiding the challenges of managing cryptocurrency holdings.
The SEC’s decision to delay follows their recent approval of options trading for BlackRock’s Bitcoin ETF, a move Bloomberg senior ETF analyst, Eric Balchunas, described as a “huge win” for Bitcoin ETFs.
This highlighted the SEC’s growing involvement with cryptocurrency-based financial products, but also their cautious approach.
As of recent data, BlackRock’s iShares Ethereum Trust (ETHA) holds net assets worth approximately $977 million, according to data from SoSoValue.
Since its launch in July 2024, ETHA has seen inflows of $1.10 billion, the highest among the nine available Ethereum ETFs.
However, the overall performance of these ETFs has been mixed, with the nine spot Ethereum ETFs reporting more than $624 million in outflows since they were introduced.
For now, the SEC’s postponement leaves investors waiting until November 2024 for a clearer picture of whether these Ethereum ETFs will move forward.
