Franklin Templeton, a prominent player in the asset management industry, has unveiled a new product called the “Franklin Ethereum TR Ethereum ETF,” also known as EZET. This Ethereum spot ETF has made its debut on the Depository Trust and Clearing Corporation (DTCC) website, a vital platform for handling securities transactions in the United States.
The DTCC’s listing indicates that the ETF is ready for creation and redemption, which is a crucial feature for these funds. It allows investors to initiate or close their positions based on market demand. This flexibility ensures that the ETF’s price closely aligns with the actual value of Ethereum it represents.
It’s important to note that despite being listed on the DTCC, the Securities and Exchange Commission (SEC) has not yet given its final approval. The DTCC lists numerous securities eligible for trade and settlement, but SEC approval involves a rigorous regulatory process.
Franklin Templeton made its intentions clear on February 12 by submitting an S-1 filing to the SEC for this spot Ether ETF. If approved, the ETF will be listed on the Chicago Board Options Exchange as the “Franklin Ethereum ETF.”
However, on April 23, the SEC postponed its decision and extended the deadline to June 11 for further review of the application. This extension gives the SEC additional time to carefully consider the proposed rule change for trading these shares on the Cboe BZX Exchange.
The outlook for Ethereum ETFs is uncertain. Recent meetings between ETF issuers and the SEC have left companies like VanEck and ARK Investment Management, along with seven others, feeling discouraged. They have applied to the SEC with the hope of directly tracking Ethereum’s spot price.
Unfortunately, feedback from the SEC has not been promising, indicating a possible denial of these applications. Unlike the more open discussions that led to the approval of spot Bitcoin ETFs in January, the current talks have been one-sided, with the SEC providing limited details.
This change in dialogue intensity can be attributed to Gary Gensler’s leadership at the SEC, as he is known for his critical stance on cryptocurrencies and concerns about market manipulation. These concerns have previously prevented spot Bitcoin ETFs from being approved for over a decade.
Industry sentiment, as expressed by Todd Rosenbluth of VettaFi, suggests a murky regulatory future, with approval likely being pushed to 2024 or beyond. Despite the potential rejections on the horizon, companies remain engaged and plan to submit additional documentation to keep the dialogue open with the SEC.
The market’s response has been a mix of hope and hesitation. Although Ether’s price has seen some growth this year, it remains overshadowed by Bitcoin’s stronger performance. Experts like Hong Fang of OKX believe that the expectation of a regulatory rejection is dampening Ether’s price growth and creating a cautious atmosphere among investors.
The SEC’s ongoing discussions, including a notable one with Coinbase regarding Grayscale’s application to transform its Ethereum Trust into an ETF, highlight the complex regulatory landscape. These discussions revolve around whether the surveillance mechanisms in place for Bitcoin futures ETFs, approved in 2021, are sufficient for monitoring spot Ether ETFs.
As the discussions continue, some experts, such as Matt Hougan from Bitwise Asset Management, believe that the SEC’s hesitation may be due to a need for more data on Ether’s market behavior. If the SEC ultimately decides against Ether ETFs, there is a possibility of legal challenges, and industry stakeholders are prepared to advocate for their interests in court.
