The U.S. Securities and Exchange Commission’s (SEC) impending decision on Ethereum ETFs has left the cryptocurrency industry in a state of uncertainty. Crypto analyst Michaël van de Poppe and MicroStrategy CEO Michael Saylor have both expressed skepticism about the approval of Ethereum Spot ETFs, predicting delays and potential rejections. With the SEC's ongoing investigation into Ethereum's classification as a security, the approval process faces significant hurdles. This decision could have far-reaching implications for major cryptocurrencies and companies like BlackRock, which are also seeking ETF approvals. As the industry braces for the SEC's verdict, the future of Ethereum ETFs hangs in the balance.

Application Delay Anticipated

This struggle is being led by three of the seven candidates: Hashdex Nasdaq, Ark 21 Shares, and VanEck. Given the SEC’s ongoing investigation into the underlying securities concerns, they are up against a daunting task. Instead of flat-out rejecting these petitions, Van de Poppe thinks the SEC will delay their approval. The emphasis may now be on possible approvals later in the year, depending on this decision.

Michael Saylor predicts that the SEC will take a harder line on cryptocurrencies, especially Ethereum. According to his forecast, Ethereum may be classified as a security by the SEC by the summer of this year. Applications for the Ethereum Spot ETF, both existing and prospective, may find this development problematic. Approval procedures for these ETFs may encounter substantial legal hurdles if Ethereum is classified as a security.

Implications for Major Cryptocurrencies

Major cryptocurrencies such as Ethereum, BNB, XRP, Solana (SOL), and Cardano (ADA) might all be impacted by this categorization. More comprehensive regulation may result from the far-reaching effects on the cryptocurrency sector. Companies like BlackRock, who is also vying for an ETF, may experience delays or rejections in the approval process.

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Industry Skepticism and Regulatory Challenges

Cryptocurrency journalist Eleanor Terrett recently shared some thoughts on the approval of Ethereum spot ETFs by the Securities and Exchange Commission (SEC). Once-high optimism about the SEC approving Ethereum spot ETFs by May 23 is now waning, according to the journalist.

In recent weeks, meetings between companies, asset custodians, and the SEC have been largely one-sided. Companies and custodians are trying to mobilize SEC officials to start the process, but officials are not stepping in in any meaningful way as they did with Bitcoin spot ETF applications.

The reason behind this lack of engagement is believed to be due to the SEC's dissatisfaction with the approval of Bitcoin spot ETFs. SEC chairman Gary Gensler reportedly believes he has already pacified the industry with this approval.

Political Backlash and Market Sensitivity

However, this was not well received by everyone. Influential anti-crypto politicians, including Senator Elizabeth Warren, are angry at the SEC for approving Bitcoin ETFs in the first place. They oppose the same thing happening to Ethereum.

It seems difficult to evaluate the SEC staff's stance on this issue. “We're not sure anyone really knows what's going on in his head. But if they're going to have a chance they're going to have to start working soon,” a source told Terrett.

With just over 2 months until May 23, time is running out for Ethereum spot ETFs to be approved.

Ethereum ETF Applications Face SEC Rejection Risk

Spot Bitcoin ETF funds have achieved a significant milestone, igniting hopes for similar proposals for other cryptocurrencies like Ethereum. However, crypto expert and lawyer Jake Chervinsky holds a contrary opinion. He suggests that the pending applications for an Ethereum ETF process could be rejected by the U.S. Securities and Exchange Commission (SEC).

Legal and Political Pressures

Chervinsky stated that the approval of a spot Ethereum ETF fund would intensify political pressure on the financial regulator. Despite being influenced by court decisions, he pointed out that the SEC is already facing a lot of political backlash for approving Bitcoin ETF applications. The attorney emphasized the precedent of the SEC adopting legally dubious stances to align with political agendas and suggested that the federal agency could base its rejections on similar grounds:

“The SEC has a legal argument that could justify rejecting applications, even if it’s wrong, and we know that the SEC is willing to take incorrect legal positions in court to meet political priorities.”

Chervinsky noted that the approval of Bitcoin ETFs has increased market sensitivity, with prices reacting more to investor sentiment than intrinsic value. The surge of Bitcoin’s price above $60,000 following ETF approvals is likely to reinforce this trend for Ethereum ETF applications.

Potential Impact on Market Dynamics

In conclusion, Chervinsky anticipates that the SEC will reject Ethereum ETF applications to maintain market oversight. His arguments are consistent with recent reports indicating the SEC’s ongoing discomfort with cryptocurrencies. Additionally, industry sources expect the Commission to act cautiously due to Ethereum’s uncertain legal status.

Noteworthy Details of the Process

While many view BlackRock’s interest in an Ethereum ETF fund positively, Chervinsky warns against assuming regulatory approval is guaranteed. He suggests that the SEC could cause BlackRock and other Ethereum ETF issuers to withdraw their applications for various reasons:

“Yes, Blackrock is on the other side. However, Blackrock’s nearly perfect track record in getting ETF applications approved is as much about their ability to exert pressure as it is about their collaborative relationship with the SEC. If the SEC asks Blackrock and other Ethereum ETF sponsors to withdraw, I bet they will.”

BlackRock, the world’s largest asset management firm, manages over $9 trillion in assets. Known for successful ETF applications, BlackRock recently led the charge in the cryptocurrency ETF space.

Future Prospects and Industry Sentiment

The future of Ethereum ETFs remains uncertain as the SEC continues its deliberations. The potential classification of Ethereum as a security could have significant implications for the entire cryptocurrency market. Companies and investors are closely monitoring the situation, hoping for a favorable outcome.

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Conclusion

The SEC's impending decision on Ethereum ETFs has created a wave of uncertainty in the cryptocurrency industry. With key figures like Michaël van de Poppe and Michael Saylor expressing skepticism, the approval process faces significant challenges. The potential classification of Ethereum as a security could have far-reaching implications for major cryptocurrencies and companies seeking ETF approvals. As the industry awaits the SEC's verdict, the future of Ethereum ETFs remains in a state of flux.