BlackRock Presents Case Against Differential Treatment of Crypto Futures and Spot ETFs by SEC

BlackRock has made a compelling argument in which they assert that the U.S. Securities and Exchange Commission (SEC) lacks a valid basis to treat applications for spot-crypto and crypto-futures exchange-traded funds (ETFs) differently. The latest development in this regard involves the “iShares Ethereum Trust,” a spot-Ether (ETH) ETF, which was formally confirmed by BlackRock on Nov. 9 after Nasdaq submitted the 19b-4 application form to the SEC on behalf of the firm.

Challenge to SEC’s Regulatory Distinctions

BlackRock directly challenges the SEC’s rationale for consistently denying applications for spot crypto ETFs, which it believes is based on inaccurate regulatory distinctions between futures and spot ETFs. The company pointed out that the SEC has greenlit ETFs offering exposure to ETH futures, with pricing based on the underlying spot ETH market. Consequently, BlackRock contends that the SEC must also approve ETPs that provide exposure to spot ETH.

Regulatory Favoritism

While the SEC has not yet approved a single spot-crypto ETF application, it has given the green light to several crypto futures ETFs. The SEC justifies this differential treatment by asserting that crypto futures ETFs are subject to superior regulation and consumer protections under the 1940 Act compared to spot-crypto ETFs governed by the 1933 Act. Furthermore, the SEC appears to favor regulation and surveillance-sharing agreements over the Chicago Mercantile Exchange’s (CME’s) digital asset futures market.

BlackRock’s Assertation

BlackRock disputes the SEC’s preference for the 1940 Act, arguing that it does not bear relevance to the underlying assets of the ETFs. It emphasizes that the distinction between the registration of ETH futures ETFs under the 1940 Act and the registration of spot ETH ETPs under the 1933 Act is inconsequential in the context of ETH-based ETP proposals.

Market Surveillance

BlackRock highlighted that the SEC’s approval of crypto futures ETFs via the CME implicitly signifies that the CME surveillance can detect fraud in the spot market that would impact spot ETPs. Consequently, BlackRock contends that the SEC lacks a justifiable reason to reject the application based on its current line of reasoning.

Predictions and Implications

Crypto and ETF analysts anticipate the imminent approval of the first SEC spot crypto ETF, with Bloomberg ETF analysts projecting a 90% likelihood of approval by January 10 next year. This underscores the potential impact of the ongoing discussions and arguments on the cryptocurrency and ETF markets.

It is evident that BlackRock’s case has sparked significant interest and could potentially influence the regulatory landscape governing cryptocurrency-related financial products.

Editor Notes

The regulatory debates surrounding cryptocurrency ETFs are critical in shaping the future of cryptocurrency markets. Stay updated on the latest developments in the world of cryptocurrencies and financial regulations by visiting Uber Crypto News.