Franklin Templeton, a heavyweight in asset management, has launched a new product called the “Franklin Ethereum TR Ethereum ETF,” officially coded as EZET. This Ethereum spot ETF has made its debut on the Depository Trust and Clearing Corporation (DTCC) website, a critical platform for handling securities transactions across the United States.
The DTCC’s listing shows the ETF is ready for creation and redemption — a vital feature for these funds. It means investors can either start or close their positions based on market demand. This flexibility helps maintain the ETF’s price closely aligned with the actual value of Ethereum it represents.
Understanding the SEC’s Involvement
While the ETF has been listed, this doesn’t mean the Securities and Exchange Commission (SEC) has given the final nod. The DTCC lists many securities eligible for trade and settlement, but SEC’s approval is a whole different ball game, focusing on rigorous regulatory criteria.
Earlier, on February 12, Franklin Templeton made its intentions clear by submitting an S-1 filing to the SEC for this spot Ether ETF. If the SEC approves, the ETF will be listed on the Chicago Board Options Exchange under the name “Franklin Ethereum ETF.”
However, on April 23, the SEC put off its decision, moving the deadline to June 11 to further review the application. This extension grants the SEC additional time to pore over the proposed rule change for trading these shares on the Cboe BZX Exchange.
Industry Expectations and Challenges
The outlook for Ethereum ETFs isn’t too sunny. Recent meetings between ETF issuers and the SEC have left companies like VanEck and ARK Investment Management, along with seven others, a bit discouraged. They’ve applied to the SEC hoping to track Ethereum’s spot price directly.
Regardless, feedback from the SEC hasn’t been promising, suggesting possible denial of these applications. In stark contrast to the more open discussions that led to the approval of spot Bitcoin ETFs earlier in January, the current talks have been more one-sided, with no significant details shared by the SEC.
This change in dialogue intensity comes under the leadership of Gary Gensler, known for his critical stance on crypto, raising concerns about market manipulation which had previously kept spot Bitcoin ETFs off the table for over a decade.
The broader industry sentiment, captured by Todd Rosenbluth of VettaFi, suggests a cloudy regulatory future, with approval likely pushed to later in 2024 or beyond. Despite potential rejections on the horizon, companies remain engaged, planning to submit additional documentation to keep the dialogue open with the SEC.
Market Impact and Forward Look
The market has reacted with a mix of hope and hesitation. Ether’s price has seen an uptick this year but remains overshadowed by Bitcoin’s stronger performance. Industry voices like Hong Fang of OKX note that expectations of a regulatory thumbs-down are dampening Ether’s price growth, creating a cautious atmosphere among investors.
On another front, the SEC’s ongoing discussions, including a notable one last month with Coinbase regarding Grayscale’s application to morph its Ethereum Trust into an ETF, underscore the complex regulatory landscape. These talks hinge on whether the surveillance mechanisms in place for Bitcoin futures ETFs, approved back in 2021, suffice for monitoring spot Ether ETFs.
As discussions go on, some experts like Matt Hougan from Bitwise Asset Management believe the SEC’s hesitancy might be due to needing more data on Ether’s market behaviors. The possibility of legal challenges looms large if the SEC ultimately decides against Ether ETFs, with industry stakeholders prepared to push for their interests in court.
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