The Securities and Exchange Commission (SEC) has delayed decisions regarding in-kind redemptions for Bitwise's crypto exchange-traded funds (ETFs) and Grayscale's plan to incorporate staking into its Ethereum Trusts. These delays are a sign the SEC is moving carefully as the world of crypto investment products develops.
The SEC’s determination marks a reasonable approach to the development of innovative characteristics in crypto ETFs. Other markets around the world are clamoring for in-kind redemptions and staking. At the same time, the SEC is closely scrutinizing these mechanisms as they relate to the U.S. market.
The SEC now has until June 3rd to rule on in-kind redemptions for the pending products from Bitwise and WisdomTree. A decision on Grayscale’s staking proposal is due by June 1st.
The SEC’s message today is pretty unequivocal — it is decidedly not ready to greenlight two key characteristics that identify crypto ETF issuers’ desired flamingo features. This puts those issuers in a painful limbo as they await a determination. The SEC has never allowed staking inside of spot ether ETFs before. Multiple other jurisdictions, like Hong Kong, Canada, and Europe, have already green-lighted the use of staking for ETFs.
“They don’t care what other regulators are doing in my experience, they might learn from them but I don’t think a regulator approving something is going to make the SEC jump through hoops and catch up. They’ll go at their own pace.” - James Seyffart, ETF analyst at Bloomberg Intelligence.
Cboe has been deeply encouraged by the SEC’s approval of the four amended filings from March. These filings are for the Fidelity Ethereum Fund (FETH) and the Franklin Ethereum ETF (EZET). Fidelity, Franklin Templeton, VanEck and Invesco/Galaxy are now four of the current ether ETF issuers that filed the amended filings in March.
