The fate of these Ethereum (ETH) spot ETFs could be decided

The fate of Ethereum (ETH) spot ETFs could be decided this week by a single vote from Gary Gensler, chairman of the U.S. Securities and Exchange Commission – if history is any indication.

In January, approval for spot Bitcoin ETFs was obtained by a panel of five commissioners. Two crypto-friendly commissioners, Hester Peirce and Mark Ueda, voted in favor of approving ETFs, while commissioners Carolyn Crenshaw and Jaime Lizarraga voted against.

Gensler also voted for its approval, leading many to believe that his vote ultimately secured approval for the Bitcoin Spot ETFs, which were approved by a 3-2 vote on January 10, 2024.

SEC Final Votes on Bitcoin Exchange Traded Fund. Source: SEC

This week, the same five SEC commissioners are expected to vote on whether to approve or reject VanEck’s ETF on May 23. Here’s what we know about them.

Hester Pierce

Pearce earned the nickname “Crypto Mom” for a reason: she is bullish on digital assets and wants to see more decentralization integrated into the broader financial system.

She did not confirm how she would vote on cash ETFs.

However, she has become integrated into the Ethereum community, having attended and spoken at ETHDenver in Colorado in late February.

Hester Pierce (left) speaks at ETHDenver. Source: ETHdenver

Pierce has criticized the SEC’s approach to oversight of the cryptocurrency industry in the past, calling parts of the securities regulator’s approach “unproductive” and “unnecessary.”

Caroline Crenshaw

Crenshaw is a vocal critic of the cryptocurrency industry and was a vocal opponent of the Bitcoin ETF’s immediate decision.

At the time, Crenshaw said the price of Bitcoin ETFs would be affected by fraud and market manipulation across the industry – and that by approving Bitcoin products, the SEC would fail to protect U.S. investors .

There is no evidence to suggest that Crenshaw has changed his mind on cryptocurrency spot ETFs since then.

Caroline Crenshaw. Source: SEC

“There is no regulatory oversight of these markets, nor any other adequate mechanisms to detect and deter fraud and manipulation,” Crenshaw said in opposition to Bitcoin ETFs.

She added: “(Spot trading) is fragmented and spread across different international trading platforms, with many markets not subject to significant regulation. »

Mark Ueda

Besides Pierce, Ueda was the only other commissioner to criticize the SEC for its “regulation by enforcement” approach to the cryptocurrency industry.

He disagreed with the SEC’s decision to deny Coinbase’s petition last December, which accused the agency of acting arbitrarily and capriciously in its refusal to design rules to clarify oversight of the sector .

Ueda also voted in favor of approving Bitcoin exchange-traded funds, but expressed “strong concerns” about how the SEC reached its decision.

Mark Ueda (right) speaks at the Milken Institute conference. Source: Eléonore Terret

He claims the commission deviated from the “significant market” test it uses to decide exchange-traded products and instead approved Bitcoin ETFs through “other means.”

Ueda called the SEC’s reasoning “flawed” but cited “independent reasons” behind its decision to vote in favor of spot Bitcoin ETFs.

However, it is not clear what these “independent reasons” are, let alone whether they would also apply to Ethereum ETFs.

Jaime Lizarraga

Lizárraga voted against approving Bitcoin exchange-traded funds and was the only commissioner who did not issue a statement following the decision.

However, he reportedly said that the promise of Bitcoin “as a viable alternative to traditional finance” and “true financial inclusion” had not been delivered in a speech he gave at Brooklyn Law School in November 2022.

At the time, he disputed the notion that the SEC was taking a “regulation by enforcement” approach to the cryptocurrency industry.

Jaime Lizarraga. Source: SEC

Most cryptocurrencies are also believed to be subject to U.S. securities laws and, therefore, operate illegally.

There is no evidence to suggest that he has changed his views since the approval of Bitcoin ETFs.

Gary Gensler

Although Gensler voted in favor of Bitcoin ETFs in January, some believe he was forced to do so because Grayscale had won its appeal against the regulator months earlier.

There is no indication whether it will treat the current round of Ether ETF applications the same way.

Gary Gensler speaks with CNBC about cryptocurrency regulation. Source: CNBC

Earlier this month, Gensler confirmed that the SEC’s decision was still under review in a May 7 interview with CNBC:

“This is something that is currently before our committee. We are a committee of five members and these files will be examined in due course.

Gensler was also recently accused of avoiding answering whether Ethereum serves as security – even when asked by Congress.

Deadlines for filing Ether ETFs with the SEC. source: James Seyphart

Meanwhile, other potential problems are underway. There is an ongoing investigation into the status of Ether as a potential security tool – led by SEC Enforcement Division Director Gurbir Grewal.

A few fund managers also claimed that the SEC was less involved in Ethereum ETFs. A few money managers now expect the SEC to reject this week, the lawyer for one of those applicants, Bitwise, reportedly said.

about: Gary “Troll” Gensler’s resignation disappoints at Crypto

More recently, ETF Shop President Nate Geraci noted that it was technically possible for the SEC to approve 19b-4 requests (exchange rule changes) but prevent an immediate launch by delaying the S-1 applications (registration statements).

source: Nate Geraci

Bloomberg ETF analysts Eric Balchunas and James Seyfart expect a 25% chance that at least one Ethereum ETF spot will be approved on May 23 – that number is down from 70% since January.

review: Cryptocurrency Regulation: Does SEC Chairman Gary Gensler Have the Final Say?

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