• The SEC is seeking public feedback on Fidelity Investments’ proposal for an Ethereum ETF, a significant step in crypto market regulation.

• Fidelity’s Ethereum ETF aims to fill a gap in the U.S. market, offering regulated, exchange-traded crypto products and safer investment options.

The United States Securities and Exchange Commission (SEC) has opened the floor for public comments on a proposed rule change that could facilitate Fidelity Investments in offering shares of its spot Ethereum, exchange-traded fund (ETF). The SEC’s decision to solicit public feedback marks a crucial step in the regulatory process and underscores the growing interest and potential regulatory acceptance of cryptocurrencies as mainstream financial assets.

Fidelity’s Ethereum ETF Proposal Under SEC Review

Fidelity Investments, a major asset management firm, applied on November 17 to the SEC for an Ethereum ETF, seeking to list and trade shares of its Fidelity Ethereum Fund on the Cboe BZX Exchange. This move aligns with a broader trend among asset management firms aiming to launch spot crypto ETFs in the U.S. The SEC’s announcement on November 30 invites “interested persons” to share their views on Fidelity’s proposal, providing a 21-day window for public comments.

Fidelity’s filing emphasizes the existing gap in the U.S. market for regulated, exchange-traded crypto products, specifically focusing on Ethereum. While investors in several countries can access Ether through exchange-traded products, the U.S. market has lagged in offering similar opportunities. Fidelity argues that the absence of a U.S.-regulated, exchange-traded Ether product leaves American investors with limited and riskier options for gaining exposure to Ethereum.

The potential approval of a spot ETH ETF could have significant benefits for U.S. investors, particularly in risk management. Fidelity contends that introducing such a product would mark a major advancement in protecting investors in the crypto asset space. Notably, the SEC has been cautious in approving spot cryptocurrency ETFs for the U.S. market, having approved ETFs tied to Bitcoin and Ether futures.

SEC Explores Bitcoin ETF Proposal by Hashdex

In addition to Fidelity’s Ethereum ETF, the SEC has engaged in discussions with Bitcoin ETF applicant Hashdex. The meeting, which took place on November 27, focused on a proposed rule change that would allow NYSE Arca to list and trade shares of Hashdex’s Bitcoin ETF. The discussion involved representatives from the SEC’s Office of the Chair, Hashdex members, an NYSE Arca member, and legal representation from Wilson Sonsini Goodrich & Rosati.

Hashdex aims to structure its fund by sourcing spot Bitcoin positions exclusively within CME’s regulated futures exchange. This approach isolates the ETF from external spot markets, addressing regulatory concerns about potential manipulation on unregulated spot exchanges. In a November 28 update, the SEC initiated proceedings and opened a request for comments on the Hashdex Bitcoin Futures ETF. The agency has not specified its current decision deadline.

Shaping the Future of Crypto in Finance

The SEC’s recent actions reflect a dynamic regulatory landscape for cryptocurrency products in the U.S. Considering Fidelity’s Ethereum ETF and ongoing discussions regarding Hashdex’s Bitcoin ETF demonstrate the regulatory authorities’ cautious approach and careful evaluation of potential risks and benefits. The decisions on these proposals could have far-reaching implications for integrating crypto assets into mainstream finance, marking a significant milestone in the evolution of the cryptocurrency market.