In the ever-evolving landscape of the financial markets, the clash between traditional regulatory frameworks and the burgeoning realm of crypto has reached new heights. At the heart of this conflict lies a divergence of views between BlackRock, the world’s largest asset manager, and the U.S. Securities and Exchange Commission (SEC).
The bone of contention? The disparate treatment of crypto futures and spot exchange-traded funds (ETFs) within the regulatory sphere. BlackRock contends that the current regulatory framework, which places a heavier burden on crypto futures, may hinder the broader adoption of these financial instruments.
BlackRock challenges SEC’s distinction of crypto investment vehicles
BlackRock has maintained that the Securities and Exchange Commission has no reasonable reason to treat spot-crypto and crypto-futures exchange-traded fund applications differentially.
BlackRock’s plan for a spot Ether (ETH) ETF called the “iShares Ethereum Trust” officially came to light on Nov. 9 after Nasdaq submitted the 19b-4 application form to the SEC on the firm’s behalf.
Thursday marked the registration of the iShares Ethereum Trust by BlackRock as a Delaware statutory trust. Ethereum’s price last increased by 9.18% to approximately $2,062.8, its highest level since April. Bitcoin, the largest crypto, rose 2.56% to $36,553, lingering near an 18-month high.
BlackRock registered a bitcoin trust using the same procedure earlier this year and submitted an application to the SEC a week later regarding the introduction of a spot bitcoin ETF.
BlackRock raised concerns in its application regarding the SEC’s handling of spot crypto ETFs, claiming that the agency consistently rejects these applications on the basis of erroneous regulatory differentiation between spot and futures 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.
BlackRock
Although the SEC has yet to accept a single spot crypto ETF application, it has approved a number of crypto futures ETFs.
The Securities Commission has stated that this is due to crypto futures ETFs allegedly having greater regulation/consumer safeguards under the 1940 Act as opposed to the 1933 Act, which only covers spot-crypto ETFs.
Furthermore, the SEC appears to prefer regulatory and monitoring agreements over the Chicago Mercantile Exchange’s (CME) digital asset futures market.
However, BlackRock contends that the SEC’s preference for the 1940 Act is irrelevant in this case since it imposes “certain restrictions on ETFs and ETF sponsors” rather than 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.
As a result, the Sponsor believes that the distinction between registration of ETH futures ETFs under the 1940 Act and the registration of spot ETH ETPs under the 1933 Act is one without a difference in the context of ETH-based ETP proposals.
BlackRock
Due to these arguments and the firm’s opinion, the SEC has no logical reason to reject the application under its current line of thought.
BlackRock is confident that the SEC will approve its Spot BTC ETF by Jan 2024
According to FOX Business journalist Charles Gasparino, BlackRock is convinced that the US Securities and Exchange Commission will approve its application for a spot bitcoin exchange-traded fund by January 2024.
Gasparino asserted on X (previously Twitter) that BlackRock, which controls $8.5 trillion in assets, is “growing increasingly confident” of the upcoming approval. In October, a former BlackRock management predicted that an ETF approval would bring $200 billion to bitcoin markets, allowing the world’s top cryptocurrency’s price to reach $330,000.
According to bigwig analysts, the SEC is scheduled to make a decision on twelve ETFs by November 17, creating an eight-day window for the decision. Bloomberg’s James Seyffart and Eric Balchunas, who are experts on the next spot bitcoin ETF approvals, indicated decisions were to happen soon.
Even if they do not get approval by Thanksgiving, experts believe they will be available in 2024: “We still believe there’s a 90% chance of approval by Jan. 10,” claimed the group.
The SEC may also face legal consequences if it bans crypto ETFs, and some experts believe the markets regulator would take a blanket move on numerous ETF applications rather than pursuing each issue separately.
