The U.S. Securities and Exchange Commission (SEC) has recently delayed decisions on several proposed Ethereum (ETH) exchange-traded funds (ETFs), signaling a cautious approach to regulating crypto investment products. These delays do impact applications from VanEck, Grayscale, and WisdomTree. In reality, the SEC needs the additional time to review the complicated questions posed by crypto assets. OpenSea is urging the SEC to provide clearer guidelines surrounding Non-Fungible Tokens (NFTs). This delay serves to underscore the broader regulatory uncertainty that has taken hold of the crypto space.
SEC's Rationale for Delay
We expect that the SEC will have to extend its review period again for these proposed rule changes. These amendments deal specifically with the VanEck Bitcoin Trust and VanEck Ethereum Trust, which Cboe BZX filed. The first notice requesting amendments was published February 19, which created a baseline deadline of April 19. Next, the SEC will spend another 45 days considering the proposed amendments.
“The Commission considers it appropriate to designate a longer period within which to act on the proposed rule change, in order to have sufficient time to consider the proposed rule change and the issues raised therein.” - The SEC document
Underlying assets for VanEck’s ETFs are Bitcoin only and Ethereum only, respectively. The SEC document states that the US SEC needs more time to make decisions on other amendments requested by other companies.
Impact on Various ETF Proposals
That’s not the only important decision that’s been deferred. This is the third time the SEC has delayed its decision on in-kind creations and redemption of the WisdomTree Bitcoin Fund, which has been extended to June 3. In like manner, the verdict on ETH staking being incorporated in Grayscale’s ETF has been rescheduled to June 1st. This request aims to make a change to the Grayscale Ethereum Trust ETF. Beyond that, it seeks to supplant the Grayscale Ethereum Mini Trust ETF. These delays indicate a deeper review of every facet involving these complex investment vehicles is a must. NYSE Arca proposed their first rule change on 14th February. This amendment would permit the two trusts to directly hold ETH and would permit staking.
OpenSea Seeks Clarity on NFT Regulation
OpenSea has been proactive in addressing these regulatory challenges. They just recently prepared and filed this letter with the SEC’s new Crypto Task Force, urging clearer policy guidance on digital assets and NFTs in particular. OpenSea makes clear for regulators what NFT marketplaces should not be categorized as exchanges or securities brokers. OpenSea’s comment letter to the SEC calls for removing the current confusion around the Non-Fungible Token space. This has been an intense year of concern by the industry at large regarding the absence of regulatory guidance surrounding NFTs.
