Exclusive Interview with Bloomberg Analyst SEC May Approve All Bitcoin Spot ETFs and Ethereum Spot ETFs Simultaneously, with the Ethereum ETF possibly being approved in May next year.

Bloomberg Analyst's Exclusive Interview SEC Could Greenlight All Bitcoin and Ethereum Spot ETFs at the Same Time, with Potential Approval of Ethereum ETF by May 2022

Author: The Block; Translator: LianGuaiBitpushNews Mary Liu

Bloomberg analyst James Seyffart, known to the crypto community for his predictions and tracking of the progress of a physically-backed Bitcoin ETF, has reiterated the potential window for the approval of the ETF to be between January 8th and 10th, 2024.

Since October, Seyffart has consistently stated a 90% chance of approval by January 10th, which is the deadline for the resolution of the applications by Ark and 21Shares, filed in April and ahead of financial giant BlackRock in June, among the sector’s 12 other applicants. The US Securities and Exchange Commission (SEC) has repeatedly delayed making a decision, but for the Ark and 21Shares ETF, it must make an approval or rejection decision by January 10th.

Seyffart believes the SEC has been strategically delaying to orchestrate various applications or at least gain approvals simultaneously to avoid giving one company an advantage – another reason Seyffart expects full approvals in January.

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“But if they [SEC] deny them at that point in time, they’re arguably not a rational regulatory body,” he said.

SEC Doesn’t Want to Play the “Kingmaker” Role

Seyffart suggests that the SEC “doesn’t want to pick winners in terms of who has the most assets under management or who has the most liquidity. So if they were going to approve all of these things, they’d likely approve them all at once because they wouldn’t want to play the role of a kingmaker in this situation.”

When asked why, Seyffart said, “We’ve heard complaints from different people, including people involved in the process and others who know stakeholders.”

He added, “We have very reliable sources, but there were some sources that we couldn’t validate. But we heard similar things from different people and different angles, and we’ve been hearing it for over a year. But, it’s really important trying to figure out what the truth of that is, looking through the calendar, looking at all the application dates and deadlines, and trying to piece together the puzzle.”

Seyffart went on to say that the prospect of mass approvals is unusual compared to traditional ETF applications, where if a company is the first to apply and gets SEC approval, they would be the first to list a product, but the case of crypto-related products is unique, as multiple Ethereum futures ETFs were approved simultaneously earlier this year.

Analysts say: “Different participants (regarding Ethereum futures ETF) have taken various measures. In particular, Valkyrie and some other issuers have been racing against each other, but the SEC has essentially tried its 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 a spot Bitcoin ETF

Seyffart says that the victory of Grayscale Investments in the lawsuit to convert its flagship product, the Grayscale Bitcoin Trust (GBTC), into a spot Bitcoin ETF in August, is another major factor that the SEC may approve.

He said, “I think the SEC has been backed into a corner, judges have basically 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 bit too far, and now they are a bit forced into a predicament.”

He believes that Grayscale’s case eliminates the need for a surveillance 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 points out that although meetings are ongoing between Grayscale and the SEC, the situation is still quite unique.

He adds, “So my view is that if a company is not approved on the first day, then it may be Grayscale.”

Ethereum spot ETF may take longer

Although the prospect of a spot ETF for Bitcoin is optimistic, Seyffart states that the outlook for a spot ETF for Ethereum is “completely different.”

Seyffart says that he can almost guess how the SEC and Gensler will argue about how Ethereum products are different and highlights the differences between the futures market, which 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 adds 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. He points out that the deadlines for the decisions on the Ark/21Shares and VanEck spot Ethereum ETFs are May 23rd and May 24th, respectively, so he believes a spot Ethereum ETF is “more likely” to be approved by the end of May.

He says, “This doesn’t mean they will automatically be approved. But I do think that if a spot Bitcoin ETF is approved, it will be 100% positive signal, a very positive sign that we may see a spot Ethereum ETF get approved, but it does not have a 90% probability, that’s for sure.”

The Potential Timeline Between Approval and Launch

The simple answer is that the potential timeline between approval and launch of a Bitcoin ETF is still uncertain.

Seyffart points out that approval falls under the SEC Trading and Market Division’s 19b-4 process. But in order for the ETF to launch and start trading, its S-1 prospectus must first obtain approval from the SEC Division of Corporation Finance, which provides details of the issuer’s business operations and financials.

Seffart adds that multiple meetings have already been held between the SEC and the issuer to address these issues, leading him to believe that once 19b-4 receives approval, the signing of the S-1 may occur. On the other hand, if the SEC is not prepared, they may only provide 19b-4 approval, and the listing will be delayed until S-1 approval is obtained, which could take several days or weeks. However, he emphasizes that predicting the exact timeline is uncertain.

Seyffart highlights that if these funds are listed, the cautious nature of mainstream brokerage firms and banks (characterized by strict due diligence processes and a requirement for a long track record) may slow down their adoption. He states, “So, not all advisors will immediately allocate a percentage of their clients’ portfolios to them.”

Those who immediately buy into the product may be more inclined towards a self-directed IRA or an independent advisor, with some funds simply being shifted from existing grayscale trusts or international crypto ETF ecosystems. Seyffart says, “That being said, if anyone is able to add it quickly, it is likely to be BlackRock, as they have very good relationships with all these types of platforms.”

Seyffart states, “Obviously, I think the first day they launch, we will see significant inflows, I would guess potentially hundreds of millions of dollars. On a longer-term basis, no doubt there will be billions of dollars flowing into these products – there’s a reason the world’s largest asset manager (referring to BlackRock) is trying to launch them and get involved in the competition.”

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