February 7, 2024 at 11:16 GMTModified date: February 7, 2024 at 11:16 GMT
February 7, 2024 at 11:16 GMT

SEC delays approving Ethereum ETF from Invesco and Galaxy

The SEC has delayed the approval decision on Invesco and Galaxy’s Ethereum ETF, asking first for public feedback.

SEC delays approving Ethereum ETF from Invesco and Galaxy

The U.S. Securities and Exchange Commission (SEC) has delayed its decision on the spot Ethereum ($ETH) exchange-traded fund (ETF) proposed by investment giants Invesco and Galaxy Digital. 

This delay, announced on Tuesday, highlights the regulatory scrutiny facing cryptocurrency products seeking legitimacy in the U.S. financial markets, with the SEC now asking for public feedback. 

This proposed ETF would enable professional investors to directly invest in spot Ether, expanding beyond the current options such as ETH futures available on the Chicago Mercantile Exchange (CME) for regulated U.S. investors and funds interested in Ethereum.

SEC seeks public insight

The SEC has opened the proposal to public comments, as outlined in the recent filing that announced the delay. The commission is specifically asking for feedback on several key points regarding Galaxy Digital and Invesco’s proposed ETF. 

This request for public feedback focuses on several critical aspects, including the proper filing of the ETF under the rules for commodity-based trust shares and whether the justifications for Bitcoin ($BTC) ETFs are equally applicable to an Ethereum spot ETF.

The recent filing asked: “Are there particular features related to ether and its ecosystem, including its proof of stake consensus mechanism and concentration of control or influence by a few individuals or entities, that raise unique concerns about ether’s susceptibility to fraud and manipulation?”

There’s an interest from the SEC in understanding the potential risks of market manipulation associated with the proposed ETF, reflecting ongoing regulatory concerns about the stability and integrity of cryptocurrency markets.

Analyst and market reactions

James Seyffart, an analyst with Bloomberg Intelligence, said that the delay was anticipated and predicts further delays in the coming months. He highlighted 23 May as a significant date, marking the final deadline for a decision on a similar application by VanEck.

Earlier this year, the SEC also postponed decisions on ETF applications by Grayscale Investments for its Ethereum trust product and BlackRock for an ether ETF. 

However, there is still optimism in the financial sector about Ether’s potential growth. Analysts, including those from Standard Chartered Bank, anticipate a significant increase in ETH’s price leading up to the expected approval dates in May, with predictions of up to a 70% rise as ETF applications are anticipated to be approved.

Despite the delay, ETH is reacting positively. The second largest cryptocurrency was trading hands for $2,370 on 7 February, up 1.6% in the past seven days. 

While the U.S. grapples with regulatory decisions on Ethereum ETFs, Europe and Canada have moved ahead, hosting billions of dollars in both spot and futures ETH-related products.

According to a recent Coingecko study, Europe leads the Ethereum ETF market with an 81.4% share, boasting 13 ETH-backed ETFs that encompass both spot products and futures funds, totalling $4.6 billion in assets under management (AUM).