Grayscale's Filing for Ethereum Futures ETF Withdrawn over Regulatory Uncertainty

Thursday, 09/05/2024 | 17:37 GMT by Jared Kirui

The intended listing platform, NYSE Arca, withdrew the application ahead of the final decision by the SEC.

Asset managers, including VanEck and ARK Investments/21Shares, are waiting for the regulator's decision on spot ether ETF applications.

Grayscale's proposal to list exchange-traded funds (ETF) tied to the price of ether was recently withdrawn, according to a notice by the Securities and Exchange Commission (SEC). NYSE Arca, the platform Grayscale's ETF would have been listed if approved, withdrew the proposal ahead of an anticipated decision by the regulator on similar applications by asset managers VanEck, ARK Investments/21Shares, and others.

Ethereum ETF Faces Scrutiny

This decision has raised concerns among asset managers, who anticipate the SEC could likely decline their applications following meetings with the regulator, Reuters reported. Several investment managers launched futures-based ETFs linked to the value of ether in October last year, marking a significant milestone in the US crypto investment sector.

Grayscale entered the fray by filing its ETF application in September, anticipating to capitalize on the expanding demand for crypto investment products. However, the outcome of the SEC's deliberation is uncertain after the SEC delayed its decision.

Additionally, Grayscale's bid to convert its existing Grayscale Ethereum Trust into a spot Ether ETF is pending approval. The firm contends that the SEC's approval of ether futures ETFs sets a precedent for approving ETFs tied to the cryptocurrency spot price, given the intrinsic relationship between futures and spot markets. However, the withdrawal of the firm's Ethereum futures ETF application underscores the regulatory hurdles.

Challenges Facing Crypto Investment Firms

The withdrawal of Grayscale's Ethereum futures ETF proposal reflects the ongoing regulatory challenges facing crypto investment firms. While the SEC's decision on Grayscale's spot Ether ETF application is pending, the broader implications extend to investors navigating the evolving crypto market.

In March, Grayscale filed an application to list a new "mini" version of its Grayscale Bitcoin Trust (GBTC) exchange-traded fund (ETF), Finance Magnates reported. This move aims to provide investors with tax-free exposure to Bitcoin , marking a strategic expansion of Grayscale's offerings in the cryptocurrency investment space.

If approved, the trust, operating under the ticker symbol "BTC," will be listed on the New York Stock Exchange as an independent entity from Grayscale's primary GBTC fund. As part of the arrangement, shares of the new Bitcoin trust will be distributed to existing GBTC shareholders, with GBTC contributing an undisclosed amount of Bitcoin to the trust. The announcement came amidst Bitcoin's price surge, reaching a new all-time high of $71,415 on March 11.