BlackRock's Foray into Spot-Ether ETFs Sparks Regulatory Debate
BlackRock, a leading financial institution, has formally announced its pursuit of a spot-Ether (ETH) ETF titled the "iShares Ethereum Trust." The confirmation came as Nasdaq submitted the requisite 19b-4 application to the U.S. Securities and Exchange Commission (SEC) on behalf of BlackRock on November 9.
In the submitted application, BlackRock challenges the SEC's differential treatment of spot crypto ETFs in comparison to crypto-futures ETFs, citing what it perceives as regulatory inaccuracies. The firm argues that, given the SEC's approval of ETFs linked to ETH futures, which derive their pricing from the underlying spot ETH market, there is a logical expectation for the approval of ETPs providing exposure to spot ETH.
The SEC's inclination towards crypto-futures ETFs, purportedly due to enhanced regulatory safeguards under the 1940 Act, has prompted BlackRock to question the relevance of this distinction. BlackRock emphasizes that the 1940 Act imposes restrictions on ETFs and sponsors that do not directly pertain to the underlying assets of the ETFs.
Furthermore, BlackRock underscores that none of these restrictions address the ETF's underlying assets, whether ETH futures or spot ETH, or the markets determining the assets' pricing, such as the CME ETH futures market or spot ETH markets.
Arguing for equal treatment, BlackRock points out that the SEC has previously approved crypto-futures ETFs via the Chicago Mercantile Exchange (CME), indicating that concerns related to spot-market fraud detection have been adequately addressed.
In summary, BlackRock contends that the SEC lacks a valid reason to deny their application, given the precedent set by the approval of crypto-futures ETFs. As regulatory dynamics evolve, analysts cautiously anticipate the potential approval of a spot crypto ETF, particularly one related to Bitcoin, by January 10 next year.
This development, marked by nuanced considerations and regulatory discourse, underscores the ongoing maturation of the cryptocurrency market within the framework of regulatory scrutiny.