BlackRock, a global investment management corporation, has recently made headlines by questioning the U.S. Securities and Exchange Commission’s (SEC) approach to regulating cryptocurrency exchange-traded funds (ETFs). This scrutiny comes in light of BlackRock’s latest endeavor to launch a spot-Ether (ETH) ETF, known as the “iShares Ethereum Trust”.
BlackRock’s Argument Against SEC’s Stance
BlackRock’s contention revolves around the SEC’s apparent inconsistency in handling spot-crypto and crypto-futures ETF applications. The firm points out that while the SEC has greenlit several crypto futures ETFs, it remains hesitant to approve any spot-crypto ETFs. BlackRock argues that this differentiation is baseless, especially since ETH futures are priced based on the underlying spot ETH market. They assert that if ETFs providing exposure to ETH futures are acceptable, then those offering exposure to spot ETH should also be considered valid.
The Regulatory Discrepancy
The SEC justifies its stance by citing different regulatory frameworks: crypto futures ETFs fall under the 1940 Act, which they believe offers better regulation and consumer protections, while spot-crypto ETFs are governed by the 1933 Act. BlackRock challenges this reasoning, stating that the 1940 Act’s restrictions pertain more to ETFs and their sponsors rather than the underlying assets, which in this case are either ETH futures or spot ETH. Hence, BlackRock views the SEC’s distinction as irrelevant in the context of ETH-based ETF proposals.
The Role of CME Surveillance
Adding to their argument, BlackRock highlights that the SEC’s approval of crypto futures ETFs through the Chicago Mercantile Exchange (CME) implies a trust in CME’s surveillance capabilities to detect spot-market fraud. This, according to BlackRock, leaves the SEC with no justifiable reason to reject the spot ETH ETF proposal based on their current logic.
The crypto and ETF analyst communities are closely watching these developments. Many speculate that the SEC’s approval of a spot crypto ETF, possibly a Bitcoin-related one, is imminent. Bloomberg ETF analysts James Seyffart and Eric Balchunas even predict a 90% chance of such an approval occurring before January 10 of the next year.
