23 January 2024
Now that Spot Bitcoin ETFs have been approved by the United States Securities and Exchange Commission (SEC), the crypto space anticipates more ETFs to enter the market, particularly Spot Ethereum ETFs.
Despite this, analysts at JP Morgan, an American multinational financial service firm, have revealed a less than optimistic outlook for the potential approval of Ethereum Spot ETFs.
Ethereum Spot ETF Approval Prospects
In a note to clients issued on Thursday, January 18, JP Morgan analysts led by Nikolaos Panigirtzoglou, the Managing Director at the financial service firm, expressed their reservations regarding the anticipated approval of Spot Ethereum ETFs by the SEC.
The analysts cited regulatory and judicial reasons as the basis for their prediction, asserting that the likelihood of Ethereum Spot ETF approval is no higher than 50%.
“While we are sympathetic to the above arguments, we are skeptical that the SEC will classify ether as a commodity as soon as May,” analysts at JP Morgan stated.
Just last week, the SEC delayed the approval of Fidelity’s Ethereum Spot ETF. The regulator postponed its decision date to March 5, 2024, stating it needed more time to evaluate Fidelity’s application. Additionally, the deadline for the SEC’s final decision on the Spot Ethereum ETF applications extends from late January to August 2024.
The most decisive date that would give the crypto space a better outlook on the potential launch of these ETFs is January 25, the deadline for Grayscale’s Ethereum Spot ETF application.
Earlier in June 2022, Grayscale took legal action against the SEC for its rejection of its Spot Bitcoin ETF. In August 2023, the asset management company emerged victorious in its lawsuit, after the US Columbia Court of Appeal ruled that the SEC was wrong to reject Grayscale’s Bitcoin ETF application.
With the SEC’s recent approval of Spot Bitcoin ETF after months of legal and regulatory challenges, many crypto enthusiasts anticipate a lengthy regulatory process before the potential approval of Spot Ethereum ETFs. If Ethereum Spot ETFs are accepted by the SEC, then it would offer investors an unprecedented opportunity to gain exposure to the cryptocurrency without the need to own it.
Why ETH Spot ETF Approval Hovers At 50%
Presently, the regulatory framework surrounding cryptocurrencies in the United States is still shrouded in uncertainty. This includes XRP, which suffered a lawsuit from the SEC after the regulator labeled it a security in 2020. Additionally, there have been many other cryptocurrencies the SEC has identified as a security.
The potential approval of Ethereum Spot ETFs generally hinges on the SEC’s classification of the digital asset, whether it is a commodity or a security. In January 2024, the regulatory agency approved Ethereum futures ETFs, ‘implicitly’ accepting Ethereum as a commodity.
If the SEC identifies Ethereum as a commodity, then the potential approval of an ETF application may be in sight. However, as JP Morgan analysts have stated, it may take a considerable amount of time before the SEC makes that decision.
The regulatory agency has continually taken an aggressive approach in its regulation of cryptocurrencies in the US. Following the approval of Spot Bitcoin ETFs, SEC Chairman Gary Gensler publicly declared that the agency still does not approve or endorse Bitcoin, labeling all cryptocurrencies as investment contracts subject to federal securities laws.