On Saturday a small step forward was taken towards the approval of Ethereum spot ETFs in the USA.
Indeed, Franklin Templeton’s application for the issuance of the Franklin Ethereum TR Ethereum ETF (EZET) has been listed on the DTCC website.
Summary
The listing on DTCC: a step towards the approval of Ethereum ETFs
Although this is to be considered good news in theory, it does not mean at all that the SEC is moving towards approving ETH spot ETFs.
In fact, the DTCC itself has specified that it is simply a standard practice for them to prepare for the possible launch of new ETFs on the market, and that it has nothing to do with the SEC approval process.
On the DTCC website page listing both active Exchange Traded Funds and those in pre-launch phase they write:
“This file includes both active ETFs that can be processed at DTCC and ETFs that are not yet active (“pre-launch”) and therefore cannot be processed at DTCC unless and until such securities have received all necessary regulatory approvals and others”.
DTCC is not a stock exchange where securities can be traded, but a technological platform that provides technical services to stock exchanges.
So it is more than logical that well before the actual stock market debut they prepare themselves to be ready in case an ETF is actually about to be launched on the markets.
The case of Bitcoin ETFs
Even regarding the launch of ETFs on Bitcoin spot on US exchanges, DTCC listed the new securities well before the actual launch.
It was October 2023, three months before the approval by the SEC.
It is worth noting that in all previous occasions when the SEC later rejected requests for the issuance of Bitcoin spot ETFs, news of their listing on DTCC had not previously been spread.
For this reason, the news of EZET’s listing is giving some hope, but in reality it would be incorrect to interpret it as an actual good sign towards approval.
The SEC will be forced to make a decision as early as May, and after the approval of the spot Ethereum ETFs in Hong Kong, many expect the SEC to eventually approve them.
However, the procedure could also turn out to be longer.
Indeed, as for Bitcoin spot ETFs, the SEC initially rejected them all, only to be forced to backtrack by a court ruling.
In theory, this time things could go similarly. In other words, in May the SEC could reject the request for the issuance of ETFs on Ethereum spot, citing the excuse of considering ETH an unregistered security.
At that point, one of the applicants could do like Grayscale in 2022 and report the SEC. The case would then end up in court, and after months of debate, it would be up to a judge to pronounce on it.
It is important to emphasize that the SEC does not have the right to decide which assets should be considered unregistered securities, while judges do. Therefore, the final decision will be up to the judge, but if legal action is taken, the ruling may not come before the end of the year.
The influence of elections on the approval of ETFs on Ethereum spot
A key point could be that the presidential elections will be held in the USA at the beginning of November.
The current president of the SEC, Gary Gensler, was appointed by the current Democratic president Joe Biden just a few months after starting his term as president.
Gensler seems very close to democratic environments, and it is unlikely that in this election year he will do anything that could harm his president.
US Democrats are largely opposed to cryptocurrencies, and if they had to accept last year’s court decision that effectively ordered the SEC to approve Bitcoin spot ETFs, they may have more difficulty digesting SEC’s approval of Gensler’s Ethereum spot ETFs.
However, as soon as the elections are concluded, the electoral prerequisites should fall, also because in the case of Biden’s victory, he would begin his second term, making him no longer eligible in the future.
Crypto ETFs
It should be noted that ETFs on Bitcoin and Ethereum spot have not been approved only in Hong Kong.
In European stock exchanges, for example, similar products have been available for several years (mostly ETNs), and they have been present on the Toronto Stock Exchange for years now.
The SEC’s battle seems more like a propaganda war than a real fight with knives between the teeth, also because it is already shaping up as a battle that is probably already lost.
The same idea that ETH should be considered an unregistered security, due to staking, actually falls apart on all sides, also because XRP has already been declared by a judge as a cryptocurrency that cannot be considered as an investment contract when traded on the secondary market (exchanges).
In other words, Gensler will easily end up losing across the board, and it is also possible that he is aware of it.
What he is probably trying to do is defend the political line of his political references, hoping that in case of Biden’s re-election he can be confirmed at the top of the government agency.
