The pending Spot Ethereum exchange-traded fund (ETF) application could be approved in May this year, with two US senators asking the Securities and Exchange Commission (SEC) to reject other crypto ETF proposals. The situation has become dire because of the request to do so.
In a March 11 letter to SEC Chairman Gary Gensler, Sens. Jack Reed and LaFonza Butler recommended that financial regulators increase oversight of Bitcoin ETFs.
Lawmakers ask SEC to halt approval of other crypto ETFs
Lawmakers expressed concerns about approving additional crypto ETFs other than Bitcoin, citing potential risks for retail investors.
They argued that other cryptocurrencies like Ethereum lack sufficient trading volume and integrity to support related ETPs. Furthermore, we question the close connection of the futures market for these cryptocurrencies with the spot market, making it difficult to conduct effective market surveillance and prevent fraud.
They are Added:
“The SEC should severely limit the upfront application of these approvals. Although the Bitcoin market exhibits serious weaknesses, it is still far more established and scrutinized than other crypto markets. No matter how vulnerable Bitcoin is to fraud and manipulation, markets for other cryptocurrencies are far more exposed to fraud.”
As such, financial regulators should protect retail investors “from ETPs that refer to cryptocurrencies that are sparsely traded or whose prices are particularly susceptible to pump-and-dump and other fraudulent schemes.” I concluded.
The lawmakers’ letter came as Bloomberg analysts significantly lowered the probability of spot approval for the Ethereum ETF to 35%.
Eric Balchunas, senior ETF analyst at Bloomberg, said: was suggested It is believed that the success of the Bitcoin ETF may have upset some politicians, leading to pessimism over the approval of the Spot ETH ETF.
SEC could face lawsuits
Paul Grewal, head of legal affairs at Coinbase, said: highlighted If the SEC decides to deny pending Ethereum ETF applications, significant legal disputes could arise.
Grewal highlighted that many digital asset commodities, including Ethereum, boast market quality metrics that outperform even the most substantively traded stocks.
According to him:
“Compared to Bitcoin, the ETH futures and spot markets show exactly the same kind of high and consistent correlations that allow market monitoring.”
As a result, Grewal argued that the SEC’s rejection of the Ethereum ETF application was based on faulty reasoning given the strong market performance exhibited by Ethereum and similar digital assets.
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