Regulatory Probe Cast Shadow on ETH Future

• The US SEC is looking to classify Ethereum as a security marring ETF chances.
• A slowdown in communications with ETF issuers suggests an approval is unlikely.

The hope of an Ethereum Exchange-Traded Fund (ETF) launch in the US is currently hanging in the balance following recent investigations from regulators on the classification of Ethereum. This regulatory probe has placed a shadow on Ethereum‘s future trajectory, prompting speculation about whether investors should be concerned.

SEC Mounts Campaign to Classify Ethereum as a Security

According to reports, the US Securities and Exchange Commission (SEC) is currently mounting an active legal campaign to categorize Ethereum as a security. Although it is widely agreed that Bitcoin (BTC) is a commodity and is governed by the Commodities and Futures Trading Commission (CFTC), SEC’s Chairman Gary Gensler has indicated that his organization views Ethereum as securities that need to be registered with the SEC.

The matter became increasingly intricate in October when the SEC authorized nine ETFs that followed the CFTC-regulated Ether futures market, implying that Ether is a commodity. Rostin Behnam, the chair of the CFTC, has stated repeatedly that his organization sees Ethereum as a commodity.

However, Ethereum’s regulatory status was once again cast in doubt last month when Prometheum, a crypto firm authorized to act as a special purpose broker-dealer, declared its plan to provide custody services for Ethereum as a security under SEC supervision. 

The topic has been in the news recently due to the competition by big financial institutions like Fidelity Investments and BlackRock, to get clearance for a spot in Ethereum ETF. 

The SEC faces a May deadline to determine whether to approve such funds. However, Bloomberg Intelligence analysts are skeptical of approval by May, given the regulator’s lack of contact with possible issuers, which contrasts sharply with the lively conversations around spot Bitcoin ETFs before its approval.

Concerns regarding Ethereum’s legal standing have also been exacerbated by reports of a private investigation the Ethereum Foundation, the nonprofit in charge of creating Ethereum’s blockchain, is facing. Citing earlier statements from Crypto News Flash, the Foundation’s capacity to obtain permission for a spot Ethereum ETF has come under scrutiny in light of this subpoena.

Against this backdrop of regulatory uncertainty, the SEC has postponed its judgment on VanEck’s Ethereum ETF approval. However, a recent video from Crypto News Flash shows that Fidelity Investments, another financial services company, has updated its spot Ethereum ETF application to allow staking as a means of generating additional money for investors.

Should Ethereum ETF Investors Be Worried?

Following the recent regulatory probe, Ethereum fell below $3,200, while BTC, the world’s largest cryptocurrency, fell to roughly $62,000 after briefly reaching $64,000.

While commenting on the drop in price of ETH, Scott Johnson, general partner at Van Buran Capital stated, “I do think this relates to the ETF …The SEC has been in an untenable position for some time with its position on ETH. This is in my opinion either an attempt to maintain its ambiguity for just a bit longer or the SEC is going nuclear option.”

In the meantime, ETH is trading at $3,370, down 1.2% in 24 hours with a trading volume of $19.5 billion, and a market capitalization of $404 billion. Overall, while the latest regulatory probe and inquiries concerning Ethereum’s classification as security have alarmed the crypto community, investors should proceed with caution.

Recommended for you: