Written by:Protos
Compiled by: Ismay, BlockBeats
Editor's note: The SEC has communicated with trading platforms and ETF applicants regarding the 19b-4 rule change request, which indicates that the possibility of Ethereum spot ETF approval has greatly increased. At the same time, Altcoin investors speculate that more tokens may also be approved for spot ETFs, but currently only Bitcoin and Ethereum futures contracts are listed on the Chicago Mercantile Exchange (CME), so this will take longer to consider.
With the possibility of the SEC approving a spot Ether ETF suddenly rising, Altcoin investors are speculating on the possibility of approval for more tokens.
In fact, just this morning, WisdomTree received approval from the UK’s Financial Conduct Authority to list its 100% physically-backed Ethereum ETP on the London Stock Exchange as early as May 28, although the product will not be available for retail investing.
Ethereum’s bullish momentum, which has seen it rise 29% this week alone, could spread to other crypto assets.
On Monday, Bloomberg ETF analysts James Seyffart and Eric Balchunas announced that the SEC has requested changes to its 19b-4 exchange rules from at least one trading platform and one ETF applicant.
The Wall Street Journal confirmed the news, while CoinDesk also cited three people familiar with the matter. Around the same time, Coinbase Institutional’s David Han wrote a report without citing the 19b-4 news, adjusting his outlook for an Ethereum spot ETF upward.
Barron's said that according to people familiar with the matter, SEC staff told trading platforms "they are inclined to approve the plans."
As early as tomorrow, the SEC could approve a so-called 19b-4 filing, which, along with a related S-1 filing due in a few weeks, could lead to investment manager VanEck finally listing a spot Ethereum ETF.
Other ETF sponsors have also filed 19b-4 applications for spot ether ETFs with the SEC, including Fidelity, 21Shares, Invesco/Galaxy and Franklin Templeton. VanEck requested an early response date of tomorrow.
Will Ethereum spot ETF drive other Altcoin ETFs?
Of course, Ethereum is just one of many Altcoin that trade on U.S. securities exchanges through the Trust.
There are more than a dozen publicly traded trusts in the U.S. that hold alternative crypto assets: Litecoin (LTC), Chainlink (LINK), Basic Attention Token (BAT), Bitcoin Cash (BCH), Decentraland (MANA), Ethereum Classic (ETC), Filecoin (FIL), Polkadot (DOT), Horizon (ZEN), Stellar Lumens (XLM), Livepeer (LPT), Zcash (ZEC), and Solana (SOL).
So, if the SEC approves a spot Ethereum ETF, can it also approve other Altcoin ETFs?
The logic of Altcoin proponents — who believe that a non-Ethereum spot Altcoin ETF could receive SEC approval soon after an Ethereum spot ETF — often follows a simple argument: If the SEC allowed Grayscale to convert its Bitcoin Trust into an ETF, why would the Commission refuse to trust promoters of other crypto assets to convert them into ETFs?
For obvious reasons, if the SEC claims that crypto assets are unregistered securities, that argument will likely fail. However, the SEC does not classify all crypto assets held in U.S. public trusts as securities.
Interestingly, many crypto trusts traded on the US stock exchange OTC Markets hold unregistered securities explicitly designated by the SEC, including SOL, MANA, and FIL. More crypto assets are rumored to be unregistered securities designated by the SEC: XLM and ZEN.
Nonetheless, some trusts traded on the U.S. OTC market do not hold unregistered securities designated by the SEC, such as the DOT or ETC trusts. Perhaps, if the SEC approves a spot Ether ETF, the commissioners might approve a spot ETF based on such potentially non-security crypto assets.
It’s important to note that just because the SEC hasn’t classified a crypto asset as an unregistered security doesn’t mean it isn’t. Congress has not required the SEC to proactively classify all assets.
Instead, the SEC simply chooses to accept or reject the applications it receives, or to take enforcement actions for illegal conduct, on a case-by-case basis because it has the time, money, staff, and resources.
The silence of the commissioners does not mean no appointment.
Of course, there are those who object to this logic. Unlike Altcoin such as DOT or ETC, only futures contracts for Bitcoin and Ethereum are listed on the Chicago Mercantile Exchange (CME). The CME market size is large for ETH alone, which may be a reason for approving only an Ethereum spot ETF and not any other Altcoin.
Ethereum Spot ETF: No Longer Clearly Rejected by the SEC?
According to Bloomberg, Barron’s, and The Wall Street Journal sources, the SEC’s Division of Trading and Markets has requested amendments to the joint 19b-4 form from the exchange and the sponsor (likely VanEck). This is a bullish sign for the potential approval of a spot ether ETF, as the SEC is usually silent or uninterested if it intends to reject a 19b-4 application, according to market observers.
Since the SEC is asking for a reapplication, its reasoning is that its interest could be a positive development.
Many people believe that the SEC’s stance on Ethereum spot ETFs is overwhelmingly negative. Joe Lubin’s ConsenSys even sued the SEC, claiming that the commissioners secretly classified Ethereum as an unregistered security.
Therefore, if the SEC is actually considering the possible approval of an Ethereum spot ETF, it would be a notable change in tone.
Amid all this media coverage, Ethereum’s price has risen 29% over the past seven days, 17% more than Bitcoin’s 12% gain.
Form 19b-4 requires applicants to provide the information necessary for the public to understand why the SEC should change its Rule 19(b)(1) under the Securities Exchange Act of 1934. In this case, exchanges and ETF sponsors must explain why the SEC should allow ETH as the sole asset of a spot ETF.
