Ethereum ETF - Discord at the SEC

Power dynamics within the SEC are emerging. And following the Bitcoin ETF, eyes are now turning towards a potential ethereum ETF.

Gary the masked maximalist?

Everyone knows, Gary Gensler dragged his feet to grant bitcoin its sesame. However, the date chosen for the start of ETFs is somewhat puzzling. Indeed, 15 years to the day, Hal Finney posted this iconic tweet:

Running bitcoin

— halfin (@halfin) January 11, 2009

Moreover, the person who taught bitcoin courses at MIT is fiercely hostile towards all shitcoins.

Who knows, maybe G. Gensler wanted to give the plebs more time to get ahead of the Wall Street millionaires. Deep down, Gary was doing us a favor by delaying the inevitable.

Anyhow, the chairman of the SEC explained himself in a statement of which the first paragraphs read:

“Today, the Commission has approved a number of spot Bitcoin ETFs. I have often said that the Commission acts within the framework of the law and the way courts interpret it. From chairman Jay Clayton in 2018 to March 2023, the Commission has disapproved more than 20 Bitcoin ETF applications. One of those filings, undertaken by Grayscale, was looking to convert the Grayscale Bitcoin Trust into an ETF.

Today we face a new set of applications similar to those we have disapproved in the past. However, circumstances have changed. The Court of Appeals for the District of Columbia held that the Commission did not adequately explain its reasoning for disapproving the ETF proposed by Grayscale. […] Therefore, I believe that the best course of action is to approve the Bitcoin ETFs.”

In other words, G. Gensler would have prolonged the pleasure if Justice hadn’t forced his hand. A view not shared by all members of the commission.

The end of omertà

Hester Peirce also issued a statement that offers a very different perspective. Here are some excerpts:

“Today marks the end of a needless but consequential saga. Over ten years after the first bitcoin ETF application was filed, the Commission has finally given its green light. This saga likely would have continued well beyond a decade without the Court of Appeals for the District of Columbia.

[…]

Rather than admit its mistake, the Commission provides a poor explanation for its change of heart. In the past, the Commission, letting its prejudices towards the underlying asset prevail, rejected applications because the bitcoin market was still immature and there were issues of manipulation.

[…]

We have wasted a decade of opportunities to do our job. If we had applied the standard that we use for other commodity-based ETFs, we could have approved these products years ago. But we refused to do so until a court forced our hand.”

These statements are not surprising. Hester Peirce had already publicly expressed her confusion about the persistent refusal to validate the Bitcoin ETF.

And for ethereum?

Gary Gensler does not intend to validate an ethereum ETF based on his statement:

“It is important to note that the Commission’s action today is limited to commodity-backed ETFs, bitcoin, and not a ‘security’. It should in no way signal the Commission’s willingness to approve ETFs for crypto-assets that are under the securities laws. […] As I have said in the past, and without prejudging any crypto-asset, the vast majority of crypto-assets are investment contracts and are therefore subject to federal securities laws.”

The SEC identifies for example crypto-assets (but not limited to) Solana, Cardano, Polygon, Filecoin, Cosmos, The Sandbox, Decentraland, Algorand, Axie Infinity, and Coti as securities.

Hester Peirce was more flexible, probably with the view of opening the door for ethereum:

“Perhaps the path towards the approval of other cryptocurrency spot ETFs won’t be as rocky.”

Indeed, let’s remember that two ethereum ETF applications are pending. Those from BlackRock and Vaneck…

BlackRock Ethereum ETF is next. (tell a friend) pic.twitter.com/oeZoK9aYSA

— Altcoin Daily (@AltcoinDailyio) January 11, 2024

The chances for an ethereum ETF seem slim. How could it be otherwise when we know that a few hundred insiders reserved 70% of the ETH for free or for a song during a controversial ICO…

Let’s bet that Wall Street will have little appetite for shitcoinery. In the meantime, there is the halving, the Fed’s monetary easing, and the $100,000 in sight.