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SEC seeks public comments on Ethereum ETF, raises concerns on proof of stake

Public comments are due in the next 21 days, and rebuttals are due in 35 days.

SEC seeks public comments on Ethereum ETF, raises concerns on proof of stake

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The Securities and Exchange Commission (SEC) has announced in a filing submitted Monday that it will be extending its decision timeline on BlackRock’s spot Ethereum exchange-traded fund (ETF) proposal. Aside from Blackrock, the regulator has also delayed its decision on another ETF proposal by crypto firm Fidelity.

The SEC can delay decisions up to three times before arriving at a final decision, with the first deadline in May. According to the filing, the SEC is opening the approval of Ethereum ETFs to public comments to “address the sufficiency” of the proposal.

In particular, the SEC has raised concerns on the “nature of the underlying assets” held by the iShares Ethereum Trust. Comments for both Fidelity and BlackRock are due in the next 21 days, and rebuttals are due in 35 days.

The SEC framed its concerns on the matter with the following question: 

“Are there particular features related to ether and its ecosystem, including its proof of stake consensus mechanism and concentration of control or influence by a few individuals or entities, that raise unique concerns about ether’s susceptibility to fraud and manipulations?”

Both BlackRock and Fidelity filed for their spot Ethereum ETFs in November last year, with other firms like Franklin Templeton, Ark 21Shares, VanEck, and Grayscale soon following suit. However, the SEC announced a delay last January and extended the initial 45-day review period, citing more time to read the proposals. The SEC had also approved ETFs on the same day, except this was for Bitcoin.

SEC Chair Gensler was also quick to temper potential criticisms and clarify that the SEC has no ulterior motives and that the delays “shouldn’t be read to be anything other than that.”

An ETF is a pooled investment security that can be purchased or sold in the same manner as an individual stock, though it differs from a mutual fund in that the latter only trades once a day after market close.

Analysts and market commentators are ambivalent about when the final decision will be handed and whether BlackRock’s ETF will get the green light. The policy environment in the United States could affect the decision and the relative success of crypto-based ETFs. BlackRock’s Bitcoin ETF currently holds a record-breaking $10 billion in assets under management.

Meanwhile, enthusiasm for the potential approval of Ethereum ETFs has spurred the price of ETH, which is currently up 7.1% at the $3,700 level, according to data from CoinGecko.

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