By Suzanne McGee and Hannah Lang
Feb 27 (Reuters) – As the dust from the U.S. bitcoin exchange-traded funds (ETFs) settles, a new wave of asset managers eagerly eyes the horizon. Buoyed by the success of the initial foray, heavyweight contenders such as Grayscale, ProShares, VanEck, Invesco, Fidelity, and Ark Investments are poised, applications in hand, to usher in 25 innovative cryptocurrency ETFs.
A Cauldron of Complexity
Casting a wide net, the proposed ETFs span a spectrum of intricacy. Some leverage options to magnify bitcoin’s volatility, while others shadow ether, the premier challenger to bitcoin’s crown. Investors see these new offerings as a beacon, illuminating the path for cryptocurrency’s deeper penetration into mainstream markets.
Bitcoin’s meteoric rise, cresting $50,000 for the first time in over two years, coupled with ether’s robust 12% surge this year, kindles hopes that the SEC might nod favorably upon these cutting-edge products.
However, amid the euphoria, a specter looms in the form of the SEC’s lingering unease regarding cryptocurrencies and complex exchange-traded instruments. Legal ambiguity surrounds ether’s standing, further complicating the regulator’s deliberations.
“There’s no haste in the SEC’s deliberations,” remarks Yesha Yadav, a digital asset regulation scholar. She notes that the SEC faces a labyrinthine challenge in determining the tolerable threshold for risk.
The Gensler Gauntlet
SEC Chair Gary Gensler, a stalwart critic of cryptocurrencies, maintains a cautious stance. Despite greenlighting bitcoin ETFs, he cautioned about their inherent risks, signaling that this decision did not signal carte blanche approval for crypto assets’ broader listing standards.
In the wake of the bitcoin ETF approval, uncertainty swells as an executive grapples with the enigmatic precedent set. Would this nod catalyze a domino effect for other products, or will each new proposal traverse its own gauntlet of scrutiny?
The SEC’s wariness toward inverse and leveraged ETFs remains palpable, exacerbated by the 2018 implosion of a volatility-tracking exchange-traded note, resulting in $2 billion in investor losses. With a cap on ETF leverage at 200%, and a scheduled review of ETF risk rules on the agenda, the regulator appears poised for prudent navigation.
The Ether Enigma
As the spotlight shifts to spot ether ETFs, a new arena beckons, necessitating SEC approval or denial by a fixed deadline. VanEck and Grayscale are at the vanguard, awaiting decisions that will shape the future of these novel products.
Gensler’s pivotal role looms large, as the SEC’s commissioners brace for a fateful review. The contrasting votes on the bitcoin ETFs hint at potential discord, positioning Gensler as the arbiter.
While Grayscale’s playbook against the SEC in the bitcoin ETF saga could offer lessons for ether, regulatory pundits speculate on Gensler’s disposition toward ether’s distinct characteristics. Ether’s pedigree as a proof-of-stake asset raises questions about its classification, diverging from bitcoin’s commodity status.
Frank Borger Gilligan, a securities attorney, underscores the SEC’s quest for investor safeguards in novel offerings. The agency’s reticence is palpable as it treads cautiously on uncharted terrain.
Will Grayscale resort to legal recourse to prod the SEC toward greenlighting ether ETFs? CEO Michael Sonnenshein’s cryptic response hints at an uncertain path ahead.
(Reporting by Suzanne McGee and Hannah Lang in Washington; editing by Michelle Price and David Gregorio)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
