SEC Delays Decision on Ethereum ETFs

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SEC Delays Decision on Ethereum ETFs; Coinbase appeals the SEC’s decision; Binance and Former CEO CZ Settle with CFTC

SEC Delays Decision on Ethereum ETFs, Final Verdict Expected in May 2024

The United States Securities and Exchange Commission (SEC) has deferred its decision on various Ethereum (ETH) exchange-traded funds (ETFs) to May 2024. Regulatory filings on December 18 revealed the postponement of decisions on the Hashdex Nasdaq Ethereum ETF and the Grayscale Ethereum Futures ETF.

The Hashdex Ether ETF aims to encompass both spot Ether and futures contracts, while Grayscale’s Ethereum Futures ETF is strategically positioned to potentially lead to the conversion of Grayscale’s Ethereum Trust into a spot Ethereum ETF, a move often likened to a “trojan horse.”

The SEC cited the institution of proceedings requiring additional public input on whether these ETFs should be listed as the reason for the delay. Additionally, the decision on the VanEck spot Ethereum ETF and the spot Ethereum ETF proposed by Cathie Wood’s ARK Invest and 21Shares has also been deferred.

Bloomberg ETF analyst James Seyffart noted that these delays were anticipated and expected before December 25. He highlighted that the final decision deadline would fall in late May.

Despite the SEC’s previous approval of Ethereum futures ETFs, there hasn’t been approval for a spot or mixed-type product yet. The market’s attention remains divided between Ethereum and Bitcoin ETFs, with analysts suggesting that the SEC could potentially decide on 13 spot Bitcoin ETFs as early as January 10. Both Bloomberg ETF analysts, James Seyffart and Eric Balchunas, estimate a 90% likelihood of approval, contributing to market optimism and a 44% growth in Bitcoin’s price over the last six months.

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Coinbase Appeals the SEC’s Decision

Coinbase continues to work for the implementation of appropriate legislation regarding cryptocurrencies defined as securities. The exchange announced that the decision would be appealed the same day after the The U.S. Securities and Exchange Commission rejected Coinbase’s petition. 

Coinbase chief legal officer Paul Grewal stated that immediate action will be taken as soon as he receives the news. The US Third Circuit Court of Appeals ordered the The U.S. Securities and Exchange Commissio on 18 December to submit a record of the decision by 24 January 2024.

Coinbase aims to force the SEC to respond to its petition while filing its appeal. The exchange characterised the rejection of the petition as “arbitrary, capricious, abuse of discretion”.

“The Commission’s refusal to engage in rulemaking, even as it continues its regulatory campaign against Coinbase and other companies with sanctions that exceed its statutory authority, disregards the Administrative Procedure Act and the principles of fundamental fairness it embodies.” 

The U.S. Securities and Exchange Commission’s rejection was met with reaction by the crypto community. SEC Chairman Gary Gensler argued that securities laws also apply to cryptocurrencies.

San Francisco-based Coinvase lobbied for political donations to support the crypto sector. The U.S. Securities and Exchange Commissio sued Coinbase for securities violations last June.

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Binance and Former CEO CZ Settle with CFTC, Paying $2.85 Billion Fine

A U.S. District Court in the Northern District of Illinois has approved a settlement against cryptocurrency exchange Binance and its former CEO Changpeng “CZ” Zhao. The settlement, initiated by the Commodity Futures Trading Commission (CFTC) in November, requires Binance to pay $2.7 billion, with CZ personally paying $150 million.

The court found that both Binance and CZ violated the Commodity Exchange Act (CEA) and CFTC regulations. The penalty includes a $150 million civil monetary fine against CZ and requires Binance to disgorge $1.35 billion in ill-gotten transaction fees. Additionally, Binance must pay a $1.35 billion penalty to the CFTC.

As part of the broader settlement reached on November 21, CZ agreed to step down from his role at Binance. On the same day, he pleaded guilty to civil charges and one criminal charge related to Anti-Money Laundering laws. CZ was subsequently ordered to remain in the U.S. until his sentencing on February 23, 2024. He faces up to 18 months in prison on money laundering charges and has agreed not to appeal any potential sentence up to that length.

In line with the settlement, CZ and Binance committed to enhancing Know Your Customer (KYC) measures on the exchange. Binance is required to implement a formalized corporate governance structure, including a board of directors with independent members, a compliance committee, and an audit committee.

Binance, a prominent global cryptocurrency exchange, has undergone significant adjustments in its services over the past 18 months, terminating or modifying core services in various jurisdictions worldwide, including the Netherlands, Cyprus, Australia, and Canada.

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SEC Delays Decision on Ethereum ETFs; Coinbase appeals the SEC's decision; Binance and Former CEO CZ Settle with CFTC