BlackRock has stated that the U.S. Securities and Exchange Commission should not differentiate between spot-crypto and crypto-futures exchange-traded fund applications.
BlackRock’s proposal for a spot-Ether (ETH) ETF, known as the “iShares Ethereum Trust,” was officially confirmed on Nov. 9. Nasdaq submitted the 19b-4 application form to the SEC on the firm’s behalf.
In its application, BlackRock questioned the SEC’s treatment of spot crypto ETFs, claiming that the agency’s basis for denying these applications is due to regulatory distinctions between futures and spot ETFs.
“Given that the Commission has approved ETFs that offer exposure to ETH futures, which themselves are priced based on the underlying spot ETH market, the Sponsor believes that the Commission must also approve ETPs that offer exposure to spot ETH.”
The SEC has not yet approved a single spot-crypto ETF application, while it has approved many crypto futures ETFs. The regulator has pointed out that this is due to the supposedly superior regulation and consumer protections of crypto futures ETFs under the 1940 Act, as opposed to the 1933 Act that covers spot-crypto ETFs.
BlackRock argues that the SEC’s preference for the 1940 Act is irrelevant, as it places “certain restrictions on ETFs and ETF sponsors” and not the underlying assets of the ETFs.
“Notably, none of these restrictions address an ETF’s underlying assets, whether ETH futures or spot ETH, or the markets from which such assets’ pricing is derived, whether the CME ETH futures market or spot ETH markets.”
BlackRock outlined that as the SEC has approved crypto futures ETFs via the CME, it has “clearly determined that CME surveillance can detect spot-market fraud that would affect spot ETPs.”
It is generally thought among crypto and ETF analysts that the first SEC approval of a spot crypto ETF — in the form of a Bitcoin related one — is only around the corner.
Bloomberg ETF analysts James Seyffart and Eric Balchunas predict a 90% chance of an approval sometime before Jan. 10 next year.
