On March 27, Fidelity, a wealth management company managing $4.5 trillion in assets, submitted an S-1 form for a proposed spot Ethereum ETF, including collateral. The company's submission can be found here.
Earlier this year, the U.S. Securities and Exchange Commission (SEC) approved the first spot Bitcoin ETF in the United States, with Fidelity being one of the first 11 issuers. Due to the precedent of the spot Bitcoin ETF approval, many people predict that the approval of Ethereum's issuance is only a matter of time.
After multiple delays in the resolution of several Ethereum (ETH) applications this year, Bloomberg analyst James Seyffart stated that the SEC has today postponed the decision on Invesco and Galaxy's Ethereum ETF applications, which is 100% in line with expectations, and more postponements are expected in the coming months. He also emphasized that the key date for the Ethereum ETF spot is May 23, which is also the final deadline for VanEck's application.
Pessimists
However, with just over fifty days left until the deadline for the approval of the ETH ETF, there are reports that the Ethereum Foundation (a Swiss non-profit organization at the core of the Ethereum ecosystem) is under investigation by a "national authority." As of the time of writing, the scope and focus of the investigation are not clear due to confidentiality requirements. The Ethereum Foundation has not responded to requests for comment.
A lawyer familiar with the situation indicated that Swiss regulatory authorities may have submitted requests for documents to the Ethereum Foundation and may be cooperating with the U.S. Securities and Exchange Commission (SEC). The lawyer stated that the Ethereum Foundation is not the only entity being asked to provide information, and other overseas entities are also under review.
As a result, some institutions are expressing pessimism. Alex Thorn, research director of Galaxy Digital, stated that the likelihood of approval in May now seems very small.
On March 21, a person from a company that recently received a subpoena revealed that the SEC's investigation into the Ethereum Foundation, based in Switzerland, began shortly after the blockchain's shift to a new governance model called "proof of stake" in September 2022.
"Proof of stake" allows Ethereum to move away from the energy-intensive model used by Bitcoin and instead adopt a model that relies on a network of trusted validators, providing the SEC with a new pretext to try to define Ethereum as a security, according to individuals familiar with the subpoenas.
"SEC has issued subpoenas to many cryptocurrency companies regarding its relationship with the Ethereum Foundation, and the lack of positive contact between the U.S. Securities and Exchange Commission and ETF applicants in the two months before the first deadline raises significant doubts about the approval in May," wrote Alex Thorn in a report on Friday.
Meanwhile, market maker GSR analyst Brian Rudick also stated in a report on Wednesday that he believes the likelihood of the SEC approving a spot Ethereum ETF in May is 20%, a significant decrease from the 75% likelihood predicted in January. The analyst stated that the U.S. Securities and Exchange Commission is under some political pressure not to approve more digital asset ETFs. The SEC's investigation into whether Ethereum is a security could significantly reduce the likelihood of approval. Regulatory agencies may seek to avoid turning the potential approval of an Ethereum spot ETF into "another big event." Regarding future expectations, the analyst believes that any approval process for a spot Ethereum ETF may take longer and may be affected by some litigation events, and he now believes that the spot Ethereum ETF is most likely to be approved between 2025 and 2026.
Optimists
It has been reported that the SEC is currently studying whether Ether is considered a security. Earlier this month, Fortune reported that the regulatory agency is seeking to classify Ether and has issued subpoenas to several companies as part of the investigation.
However, BlackRock CEO Larry Fink expressed great optimism and confidence in the possibility of an Ethereum ETF approval. He stated that even if the U.S. Securities and Exchange Commission designates cryptocurrencies as securities, an Ethereum ETF is still possible, which would strengthen the regulatory scrutiny around the second-largest digital asset.
On social media, on-chain data analyst Q (@tocuee) stated that he has discovered ETH withdrawals similar to those before the approval of the BTC ETF in 2023. In the past 24-48 hours, over $1 billion worth of ETH has been withdrawn from centralized exchanges (CEX), and this large and sustained withdrawal behavior has been observed for quite some time, first noticed in December last year.
The similar behavior of these addresses includes new addresses, large amounts, and involvement with mainstream exchanges such as Kraken and Coinbase, as well as the presence of Binance and Okx. Combining this news with Fidelity's submission of the S-1 application form for an ETH ETF, Q speculates that the approval of the ETH ETF is highly probable.
Currently, eight potential issuers, including BlackRock, have submitted documents to the SEC to bring spot Ethereum exchange-traded funds (ETFs) to the market. The regulatory agency's final decision will be made in May, and industry experts predict that regardless of how the SEC views the nature of Ethereum, the applications will not be approved.
At the time of writing, the price of ETH is $3503. Bitcoin has dominated the entire crypto market since the beginning of the year, and various "Ethereum killers" such as Solana have been encircling Ethereum. Compared to the overall bullish sentiment in the crypto market, the Ethereum community's sentiment is not particularly positive. "Can't the Ethereum ETF save the weak ETH?" the Ethereum community wonders.
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