SEC Delays Decision on Franklin Templeton’s Spot Ethereum ETF Application

The U.S. Securities and Exchange Commission (SEC) has announced a delay in its decision regarding Franklin Templeton’s proposed spot Ethereum ETF, extending the deadline to June 11, 2024. This news comes from a filing made public today, leaving the future of this financial product uncertain for the time being.

The proposed ETF, initially filed in February, seeks to track the price of ether and would utilize Coinbase Custody Trust Company and the Bank of New York Mellon as custodians.

Franklin Templeton’s Spot Ethereum ETF Decision Delayed: SEC Extends Deadline to June 2024

The SEC’s decision to extend the review period stems from a need for additional time to thoroughly evaluate the proposed rule changes and the complex issues surrounding the classification of Ethereum and its suitability for a spot ETF.

As stated by the SEC, “The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein.”

This cautious approach mirrors a similar delay for Grayscale’s Ethereum Trust proposal, which seeks to convert into a spot ether ETF following the successful conversion of its Bitcoin trust earlier this year.

This move comes amidst a surge in applications for spot cryptocurrency ETFs, with industry giants like Fidelity and BlackRock joining the race.

Initially, analysts like Bloomberg’s James Seyffart anticipated a decision in May, noting, “Many analysts have speculated that the SEC will reach a final decision on whether to approve or deny a spot Ether ETF for listing and trading on U.S. exchanges in May, during deadlines for applications from several asset managers.”

My cautiously optimistic attitude for ETH ETFs has changed from recent months. We now believe these will ultimately be denied May 23rd for this round. The SEC hasn't engaged with issuers on Ethereum specifics. Exact opposite of #Bitcoin ETFs this fall. https://t.co/TyAzAOrAC5

— James Seyffart (@JSeyff) March 19, 2024

However, the recent SEC delays have tempered expectations. Seyffart himself expressed skepticism, suggesting the current round of Ether ETF applications might ultimately be denied.

Bloomberg analyst Eric Balchunas revised his approval likelihood estimate from 70% to a more conservative 35%, highlighting the growing uncertainty.

Despite the regulatory hurdles and dimmed expectations, the market’s appetite for cryptocurrency investment vehicles remains strong.

Latest data shows US Spot #Bitcoin ETFs with a total net inflow of $12.39B and daily net inflow of $62M on 22 April. pic.twitter.com/4AdnI4sqJG

— Crypto.com Research & Insights (@cryptocom_rni) April 23, 2024

The SEC’s earlier approval of spot Bitcoin ETFs in January 2024 led to a substantial influx of capital, with these ETFs attracting a cumulative net inflow of $12.39 billion as of writing.

Approval Uncertain for Spot ETH ETFs as SEC Takes Cautious Approach

Adding to the complexity surrounding spot Ethereum ETFs, the SEC has recently initiated a period of public comment regarding their potential approval. Specifically, the commission is seeking feedback on proposals from Bitwise Ethereum Trust, Fidelity Ethereum Fund, and Grayscale Ethereum.

This move follows the SEC’s earlier approval of several spot Bitcoin ETFs in January 2024. However, SEC Chair Gary Gensler cautioned against interpreting this as endorsing crypto assets or their regulatory status.

Despite initial optimism, the likelihood of a spot Ethereum ETF approval seems to have considerably waned. Industry figures like VanEck CEO Jan van Eck have voiced skepticism about the approval prospects, suggesting that his firm’s application might face rejection.

CoinShares CEO Jean-Marie Mognetti shared this sentiment, predicting a prolonged period of inaction from the SEC on pending applications.

Adding to the pressure, Democratic Senators Laphonza Butler and Jack Reed have urged SEC Chair Gensler to exercise caution in approving crypto-based ETFs, citing potential risks to investors and concerns about inadequate regulatory safeguards.

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