Bloomberg Analyst Interview SEC Does Not Want to Play the Role of Kingmaker; Spot Ethereum ETF May be Approved in May Next Year

Bloomberg Interview with Analyst Reveals SEC's Reluctance to Act as Kingmaker; Possibility of Ethereum ETF Approval in May 2022

Source: The Block

Compiled by: LianGuaiBitpushNews Mary Liu

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Bloomberg News ETF research analyst James Seyffart, familiar to the crypto community for his predictions and tracking of progress on Bitcoin spot ETFs, is widely believed, under the influence of his views, that approval may be imminent.

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While appearing on The Scoop podcast, Seyffart reiterated the potential window for Bitcoin spot approval: January 8th to January 10th, 2024.

Since October, Seyffart has maintained a 90% likelihood of approval by January 10th, the deadline for the Ark and 21Shares applications, which were initially submitted in April, ahead of financial giants BlackRock, whose deadline is approaching, joining the field of 12 other companies. The U.S. Securities and Exchange Commission (SEC) has repeatedly delayed decisions, but for the Ark and 21Shares ETF, it must make an approval or rejection decision before the January 10th deadline.

Seyffart believes that the SEC has been tactfully delaying to accommodate various applications or at least to receive approval simultaneously in order to avoid giving any one company an advantage – which is also why Seyffart believes that full approval will be obtained in January.

He said: “However, if the SEC were to reject them at that time, they would not be seen as a rational regulatory agency to some extent”.

SEC does not want to play the role of “kingmaker”

Seyffart said that the SEC “doesn’t want to pick a favorite company to win these competitions, whether it’s for the most assets or the most liquidity. Therefore, if the SEC were to approve all of these things, it would most likely approve them all at once, because it doesn’t want to play the role of kingmaker in this situation.”

When asked about the reason, Seyffart said: “We’ve heard complaints from different people, including those involved in the process, and other people who know the stakeholders.”

“He added, ‘We have very reliable sources of information, but there are also some sources whose reliability is uncertain. But we have heard similar things from different people and perspectives for over a year. However, it is indeed important to try to find out the truth, to look at the calendar, to look at all the application dates and deadlines, and to find some clues from it.'”

“Seyffart continued to say that the prospects of large-scale approval are unusual compared to traditional ETF applications. In traditional ETF applications, if a company is the first to apply and obtain SEC approval, it will be the first to list the product. But cryptocurrency-related products are a unique case. Earlier this year, multiple Ethereum futures ETFs were approved at the same time.”

“Analysts say, ‘Different participants (regarding Ethereum futures ETFs) have taken many actions. Especially Valkyrie, some other issuers have been competing, but the SEC has basically tried their best to ensure that each applicant is approved on the same day. Therefore, this indicates to us that if the SEC approves, a spot Bitcoin ETF will follow a similar trajectory.'”

“The impact of Grayscale’s approval of spot Bitcoin ETF”

“Seyffart said that Grayscale Investments won a lawsuit against the SEC in August, in which it applied to convert its flagship product, Grayscale Bitcoin Trust (GBTC), into a spot Bitcoin ETF. This is another major factor that the SEC could approve.”

“He said, ‘I think the SEC has been backed into a corner. Basically, judges have overturned every decision and reasoning used to reject ETFs in the past. I think the SEC and Chairman Gary Gensler know they have gone a little too far and are now somewhat forced into a corner.'”

“He believes that Grayscale’s case eliminates the need for a supervisory sharing agreement, similar to the agreements many applicants currently have with Coinbase. However, since this situation is unprecedented, there are no guidelines for response time or approval processes to follow. Seyffart pointed out that although meetings between Grayscale and the SEC are ongoing, the situation is still quite unique.”

“He added, ‘So my opinion is that if a company is not approved on the first day, it could be Grayscale.'”

“Ethereum spot ETF may take longer”

“While the prospects for a Bitcoin spot ETF approval are optimistic, Seyffart states that the prospects for an Ethereum spot ETF are ‘completely different.'”

Seyffart indicated that he could almost guess how the SEC and Gensler would argue for the uniqueness of Ethereum products, pointing out that the futures market is not as strong or institutionalized as Bitcoin, emphasizing the differences between the Bitcoin proof-of-work model and the Ethereum proof-of-stake model.

He added that he disagrees with these views, but if the SEC wants to halt this process, it may delay the decision or assert that Ethereum is a security.

However, in Seyffart’s view, the SEC has implicitly accepted Ethereum as a commodity, noting that the deadline for the resolutions of Ark/21Shares and VanEck spot Ethereum ETFs is May 23rd and May 24th, respectively, so he believes that the spot Ethereum ETF is “more likely” to be approved before the end of May.

He said: “This doesn’t mean they automatically get approved. But I do think that if the spot Bitcoin ETF gets approved, that’s a 100% positive signal, a very positive signal, that we could see the spot Ethereum ETF get approved, but it’s not 90% certain, that’s for sure.”

Potential timetable between approval and launch

The simple answer is that the potential timetable between approval and launch of the spot Bitcoin ETF remains uncertain.

Seyffart points out that approval falls under the SEC’s Division of Trading and Markets’ 19b-4 process. But in order for the ETF to be launched and start trading, its S-1 registration statement must first be approved by the SEC’s Division of Corporation Finance, which provides details on the issuer’s business operations and financials.

Seffart added that multiple meetings have already been held between the SEC and the issuers to resolve these issues, which makes him believe that once 19b-4 gets approved, the signing of the S-1 may happen. Conversely, if the SEC is not prepared, they may only provide 19b-4 approval and the listing will be delayed until S-1 approval, which may take days or weeks. However, he emphasized that predicting the exact timetable is uncertain.

Seyffart emphasized that if these funds go public, the cautious attitude of mainstream brokerage firms and banks (characterized by strict due diligence processes and the requirement for long-term track records) may slow down their adoption. He said, “So not all advisors will immediately allocate a percentage of their clients’ portfolios to them.”

People who buy the product immediately are more likely to be inclined towards independent IRAs or independent advisors, where some funds are just transferred from existing grayscale trusts or the international crypto ETF ecosystem. Seyffart said, “That being said, if someone could add it quickly, it would likely be BlackRock, as they have very good relationships with all these types of platforms.”

Seyffart said, “Clearly, I believe the day they are launched will see a massive influx of funds, possibly billions of dollars. Looking at a longer time frame, there is no doubt that billions of dollars will flow into these products – the world’s largest asset management company (referring to BlackRock) is trying to launch these products and get involved in the competition for a reason.”

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