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SEC makes abrupt U-turn on Ethereum ETF approval in ‘politically motivated’ move

The Securities and Exchange Commission has green light the listing of eight Spot Ether exchange traded fund on the US stock exchanges, which approved the asset manager’s Form 19b-4 on Thursday afternoon. “It is one of the biggest regulatory shake-ups in the recent history of the SEC,” VanEckMatthew Sigel, Head of Digital Asset Research, said: Assets in a statement. The issuers include BlackRockVanEck, Fidelity and Grayscale, among others.

The agency’s relative silence on pending applications in recent months led many in the cryptocurrency industry to view approval this year as a pipe dream. Bloomberg analysts predicted the Chances of approval had fallen to 25% on Monday afternoon. But then, in a sudden turn of eventson Monday, CoinDesk first reported that issuers were “abruptly” asked by regulators to update their 19b-4 filings on an accelerated basis. Since then, at least eight of the nine issuers have done so – and Bloomberg’s experts have raised their forecast to 75%.

The price of Ether is up 25% since Monday, trading at $3,855 at 5:13 p.m. EST.

The updates requested by the SEC on Monday remain confidential, but Eric Balchunas, Bloomberg’s senior ETF analyst, said Assets he knows “for sure” that staking will be banned. In fact, this week Fidelity announced its S-1 Filing where the staking component was omitted.

But before trading in the financial products can begin, the SEC must next approve the issuers’ S-1 filings. These forms explain to potential investors and the SEC the structure of the asset, how it will be managed and, in this case, how it should reflect the performance of the underlying asset – Ether tokens. But it is also clear that the approval of these forms is a question of “when, not if,” wrote Bloomberg’s James Seyffart on X.

“We cannot recall that there has ever been an S-1 form that has not been approved following a 19b-4 approval. I don’t think there is a precedent,” Balchnaus added. He estimates that the approval of the forms will take about two weeks, as he only expects one round of comments from the SEC. That is because the Bitcoin ETFs as spot has already done a lot of “pioneering work”, so the applications in this case only need a little “fine-tuning”. In the case of Bitcoin ETFs, each round of comments lasted two weeks.

“A legitimate voting bloc”

It is the question that is being asked everywhere in the crypto world: Why did the SEC change its mind? Experts said Assets it was probably a political order from above. Thursday’s approval is “proof that the crypto community is a legitimate voting bloc,” says VanEck’s Sigel.

A bipartisan group of crypto-friendly lawmakers called on the SEC and Chairman Gary Gensler to regulate ETFs in a letter on Wednesday. “The current regulatory landscape for digital assets poses various risks for consumers, investors and market participants,” they wrote. Approval would provide investors with access to cryptocurrencies in a more secure, transparent and regulated format, they argued.

Admittedly, the letter is unlikely to be the deciding factor, but it adds to the emerging consensus in Washington that the elusive crypto vote could carry weight.

“Politics has power, especially in an election year. What we’ve heard from domestic politics is that this was politically motivated. Democrats don’t want Donald Trump and the Republicans to win on this issue and lose votes from voters who are only interested in one issue,” Balchunas says.

A Opinion poll The study released this week by the Federal Reserve shows that in 2023 only 1% of Americans used cryptocurrencies to buy something, but in a razor-thin election in which Trump Polls only 1% lead For President Joe Biden, even 100,000 votes or so could make the difference.

“Very nice”

As a result, the crypto community appears to be a growing priority in Washington, DC. On Wednesday, the House of Representatives voted for a groundbreaking regulation This would create a supervisory framework for the “market structure”.

The Financial Innovation and Technology for the 21st Century Act, or “FIT21”, outlines the separation of powers between the Securities and Exchange Commission and the Commodity Futures Trading Commission and creates rules on key issues such as commingling and custody. Although the bill was supported by 208 Republicans, it was initially pushed by only a handful of diehard, crypto-friendly Democrats. But support grew last month, resulting in 71 Democrats voting in favor of it. Support also came from Senate Majority Leader Chuck Schumer and former House Speaker Nancy Pelosi.

“It is very encouraging that the crypto community’s effective communication has changed politics in Washington to the point where elected Democratic politicians are now voting ‘yes’ to legislation that reverses the regime’s hostile attitude toward this new asset class,” says Sigel.

The House’s passage of the FIT21 bill contradicted Gensler’s attempts to warn Democrats about it.”[FIT21] would create new regulatory gaps and undermine decades-long precedents regarding the oversight of investment treaties, exposing investors and capital markets to immeasurable risk,” Gensler said in the opinion published on Wednesday.

In addition, Trump has also strengthened his pro-crypto stance in the past month. On Tuesday, his presidential campaign said It would start accepting donations via any crypto asset accepted by Coinbase“Biden’s running mate Elizabeth Warren said in an attack on cryptocurrencies that she is building an ‘anti-crypto army’ to restrict Americans’ right to make their own financial decisions,” the campaign announcement said, alluding to a re-election ad Warren posted on X last year. “MAGA supporters, now with a new cryptocurrency option, will build a crypto army that will lead the campaign to victory on November 5th!”

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