Fidelity Left Waiting as The SEC Delays ETH ETF Decision until March

The Securities and Exchange Commission (SEC) has delayed making a decision on Fidelity’s proposal for a spot Ethereum exchange-traded fund (ETF) until March 5th.

The delay gives the regulator more time to consider the issues raised by such an ETF as it weighs approval. This expected delay pushes the timeline for a final decision back to late May, when the SEC faces a deadline to approve or deny a competing spot Ethereum ETF proposal filed by VanEck.

TLDR

• The SEC delayed its decision on Fidelity’s proposed spot Ethereum ETF until March 5th to consider the issues raised
• The delay was expected, with decisions likely coming in late May when the SEC must decide on VanEck’s Ethereum ETF proposal
• Fidelity and BlackRock joined the race for a spot Ethereum ETF after futures-based ETFs were approved
• There is divided opinion on whether the SEC will ultimately approve spot Ethereum ETFs
• Meanwhile, several companies have filed proposals for leveraged Bitcoin ETFs, which may soon outnumber regular Bitcoin ETFs

Fidelity’s proposed Ethereum fund, if approved, would allow direct investment into the cryptocurrency rather than futures contracts. It aims to capitalize on a court ruling last year stating the SEC failed to provide a clear rationale for rejecting spot crypto ETFs while allowing futures-based products. The delay indicates the regulator remains cautious, however, even after approving several spot bitcoin ETFs last week.

Fidelity #ethereum ETF delayed just now. Completely expected. Dates that really matter are late May in my view. https://t.co/8mvhcPRaS7

— James Seyffart (@JSeyff) January 18, 2024

With the fate of spot Ethereum ETF approval still uncertain, financial giants Fidelity and BlackRock joined the race by filing their proposals in late 2022. This came shortly after the SEC greenlit ether futures ETFs to begin trading. Supporters view the approval of those derivative products as a positive sign that the regulator may not classify ether as a security to be stringently regulated.

Opinion remains divided on whether spot Ethereum ETFs will ultimately gain approval, despite the recent wins for spot bitcoin funds. While some analysts forecast strong 70% odds of approval by the May deadline, others note the SEC still appears hostile to crypto and may differentiate ether from bitcoin. In particular, the regulator’s view on whether ether should be classified as a security or commodity will prove crucial.

As debates continue over potential ether ETFs, proposals for leveraged and inverse bitcoin funds are rapidly accumulating. Direxion filed for 5 such bitcoin ETFs in mid-January, joining REX Shares and ProShares which previously filed for 11 leveraged funds combined earlier in 2023. If approved, leveraged bitcoin ETFs could soon surpass regular ones in number. This flood of filings displays the pent up appetite for crypto investment vehicles following years of SEC rejections.

T-Rex files 6 leveraged and inverse Bitcoin ETFs

T-Rex 1.5X Inverse Spot Bitcoin Daily Target ETF
T-Rex 1.5X Long Spot Bitcoin Daily Target ETF
T-Rex 1.75X Inverse Spot Bitcoin Daily Target ETF
T-Rex 1.75X Long Spot Bitcoin Daily Target ETF
T-Rex 2X Inverse Spot Bitcoin Daily… pic.twitter.com/eLFTiS1Gq9

— ETF Hearsay by Henry Jim (@ETFhearsay) January 3, 2024

While leveraged crypto ETF approvals may appear more likely in light of the recent spot bitcoin decisions, spot ether funds face a tougher path with more complex implications around cryptocurrency classification. The next few months will prove pivotal in determining the regulatory stance. For now, uncertainty persists even as heavy-hitting institutions line up to tap into surging investor demand should Ethereum ETF obstacles get cleared away.

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