By Hannah Lang and Chris Prentice
(Reuters) – When exchange-traded funds (ETFs) linked to the cryptocurrency ether can begin trading largely depends on how quickly issuers respond to inquiries from the U.S. Securities and Exchange Commission. United, President Gary Gensler said Wednesday.
Last month, the SEC approved applications from Nasdaq, CBOE and NYSE to list spot ether ETFs. It was a surprise victory for the cryptocurrency industry, which had expected the SEC to reject the filings after discouraging meetings with the regulator.
The SEC still has to approve ETF issuers' registration statements detailing investor disclosures before they can begin trading. That process typically involves a lot of back-and-forth between ETF issuers and SEC officials.
“These registrants are motivated to respond to the feedback they receive, but it's really up to them how responsive they are,” he said. Gensler declined to say whether he thought the process would take weeks or months.
Gensler and agency officials had not previously commented on why the SEC appeared to do a 180-degree turn and approve ether exchange filings.
On Wednesday, Gensler said last year's court challenge brought by Grayscale Investments, which forced the SEC to approve spot bitcoin ETFs in January, had influenced his thinking on ether products.
Grayscale successfully argued that because the SEC previously approved bitcoin futures-linked ETFs, it should also approve bitcoin spot ETFs, since bitcoin futures prices are highly correlated with spot prices.
Gensler said the cases are similar, as Ethereum futures have been trading since last year. The SEC staff “looked at these (ether) filings, looked at the various correlations…the correlations are relatively similar to the correlations in the bitcoin space,” Gensler said.
After the court ruled last year in favor of Grayscale, the SEC approved spot bitcoin ETFs in January. In a statement at the time, Gensler acknowledged the court's decision and added that he felt approving the products was “the most sustainable path forward.”
The SEC had rejected bitcoin ETFs for a decade. “The courts ruled otherwise. We adapted,” Gensler said.
Still, he added that he continues to see the crypto space as “riddled with fraud, scams and conflict.”
