SEC Opens Comment Period for Revised BlackRock Ethereum ETF

The U.S. Securities and Exchange Commission (SEC) has announced a call for public comments concerning the recent amendments to BlackRock’s proposed spot Ethereum exchange-traded fund (ETF). This follows the Nasdaq’s submission of a revised proposal on April 19 to ensure alignment with regulatory expectations.

The BlackRock ETF, the iShares Ethereum Trust, is an ETF that is to be used to track the performance of Ethereum’s price and has been in the works since the initial filing in November 2023.

The amendment departs rather radically from the initial proposal by changing from a model of direct exchanges with Ethereum to a cash transactions model. The SEC, as a result, has provided 21 days for stakeholders and the public to provide their comments on the proposed modifications. These comments are important as they will affect the regulatory review and probably the final decision.

Revised Structure of BlackRock’s Ethereum ETF

The initial proposal of the iShares Ethereum Trust included a creation and redemption process that involved a direct change of Ethereum. Nonetheless, the revised resubmission clarifies that these procedures will now be done in cash transactions. This type of model called the cash redemption model, is consistent with the approach used for spot Bitcoin ETFs that were approved by the SEC in January.

The transition to a cash-based approach is viewed as an adjustment towards regulatory fines focusing on financial rather than physical transactions.

BlackRock’s revised proposal also does not feature a staking provision, in contrast to firms such as Fidelity and Grayscale, which have included staking mechanisms in their revised ETF applications. This amendment indicates a prudent attitude of BlackRock, perhaps to facilitate the endorsement process by closely monitoring regulatory precedents.

Market Response and Analyst Perspectives

The cryptocurrency ETF landscape in the U.S. is still filled with uncertainty, with big financial entities resubmitting their proposals to gain the green light. However, despite such attempts, the sentiment among market analysts has turned more and more skeptical about the near-term approval of Ethereum ETFs.

Currently, Bloomberg’s ETF analyst Eric Balchunas cut his probability prediction of the approval of these ETFs by May down from around 70% to 25%.

Meanwhile, Standard Chattered has changed its initial bullish outlook and now sees the likelihood of Ethereum ETFs being approved by the SEC in May as rather low. This shift in expectations follows the absence of published constructive dialogue between the SEC and ETF applicants, which was a prior indicator of the approval of Bitcoin ETFs.

The delay in decisions by the SEC on other ETF proposals, such as those from Franklin Templeton and Grayscale, denotes a careful regulatory response to cryptocurrency-inspired financial products. The extension of the timeline gives the SEC a chance to collect and study the public feedback, a factor that will significantly determine the regulatory environment of Ethereum and other cryptocurrency ETFs.

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