The Securities and Exchange Commission (SEC) has extended the 45-day comment period on a proposed rule change that would allow NYSE Arca to list and trade shares of the Grayscale Ethereum Trust as an exchange-traded fund (ETF), according to an SEC filing released on Dec. 5th.
NYSE Arca originally submitted the proposed rule change to the SEC on October 10th of this year. Typically, the SEC has 45 days from the publication of the proposal in the Federal Register to make a decision, but the regulator has opted to extend this timeline to January 25th, 2024, in order to take more time to consider the implications.
The proposed rule change would allow the $5 billion Grayscale Ethereum Trust, one of the largest institutional investment vehicles for Ether, to convert into a spot ETF. Unlike the current trust structure, which does not allow redemptions, an ETF would provide more liquidity and could eliminate the long-standing discount at which the trust has historically traded compared to the net asset value of its underlying Ether holdings.
Grayscale has stated that they see conversion to an ETF as “the natural next step in the product’s evolution,” bringing Ethereum further into the regulated financial system. However, the SEC has yet to approve a spot crypto ETF in the U.S., having delayed decisions on several Bitcoin ETF applications earlier this year.
ETF mania
The extended timeline for an SEC decision comes as other major financial institutions like Fidelity and BlackRock have filed their own proposals for spot Ethereum ETFs over the past month. The SEC also recently opened a comment period to solicit public feedback on Fidelity’s filing.
While institutional interest continues to grow, the SEC has maintained a cautious stance, pushing back decisions and calling for more comments to fully assess market manipulation risks, surveillance mechanisms, custodial qualifications, and other factors related to the crypto asset class.
With the Grayscale decision likely to come in early 2024, all eyes are on the SEC to see whether it finally gives the green light to accessible, regulated crypto investment vehicles in the U.S. markets.
