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Ethereum ETFs in September? Gary Gensler Sets Timeline, Says CFTC Not Ready for Crypto Regulation

Last Updated June 14, 2024 8:29 AM
Giuseppe Ciccomascolo
Last Updated June 14, 2024 8:29 AM

Key Takeaways

  • US Securities and Exchange Commission Chair Gary Gensler said final approvals for Ethereum ETFs will arrive this summer.
  • Gensler avoided directly classifying Ethereum as a security or commodity, maintaining an ambiguous stance.
  • He is also working on a document with the CFTC to enhance cooperation on digital asset regulations.

US Securities and Exchange Commission (SEC) Chair, Gary Gensler, informed US senators that final approvals for exchange-traded funds (ETFs) trading Ethereum’s ether (ETH) are expected to be completed this summer.

However, when questioned by the Senate, Gensler avoided clearly classifying Ethereum as either a security or a commodity. He evaded the question by stating that the agency had only “partially” approved Ethereum ETFs without offering further clarification.

ETH ETFs May Arrive In September

In a Senate Appropriations Committee subcommittee  hearing, SEC Chair Gary Gensler remarked that the process for finalizing approvals for Ethereum ETFs is progressing “smoothly”. This comes on the heels of the initial approval of a batch of such ETFs. Gensler noted that the final registration requirements, known as S-1 filings, are currently being handled at the “staff level” within the SEC.

Once these S-1 filings receive the necessary approvals, the new Ethereum ETFs will be able to list on exchanges. This is expected to help broader market access to funds holding actual ETH, similar to the earlier introduction of bitcoin spot ETFs that hold BTC. It’s worth recalling that the SEC had initially resisted approving bitcoin ETFs. This was until a federal court ruled that the agency was mishandling the process. It prompted the SEC to comply with the court’s decision.

Despite the pending S-1 approvals for Ethereum ETFs, many in the industry now view their introduction in the US as inevitable. Legal experts, in particular, have argued that Ethereum should be classified as a commodity, given the SEC’s prior approval of an Ethereum-based ETF product.

However, when directly asked whether ETH should be considered a commodity, Gensler refrained from providing a clear yes or no answer, maintaining the SEC’s ambiguous stance on the asset’s proper classification. In contrast, Commodity Futures Trading Commission (CFTC) Chief, Rostin Behnam, during the same hearing, responded affirmatively when posed the same question, stating, “Yes”.

CFTC Nor Ready For Regulation

The classification of digital assets is crucial for determining the appropriate US regulatory body for various tokens. The SEC oversees securities tokens, while the CFTC has authority over other types. Although Gensler has consistently argued that most digital assets are securities, he has refrained from specifying which ones fall into this category. This doesn’t regard those already identified in enforcement actions.

Gensler said: “While not all crypto are crypto securities – some fall under Chair Behnam’s jurisdiction – those that are must disclose to the public.” He emphasized that many tokens remained unregistered and were violating securities laws.

Gensler, who has chaired both the SEC and the CFTC, criticized the industry for disregarding regulations. He also suggested that the CFTC does not have the necessary equipment to enforce a disclosure-based oversight system. For him, this is not within its traditional role, unlike the SEC.

CFTC Chair Rostin Behnam acknowledged that the CFTC lacks some necessary authorities to effectively police the crypto markets. He pointed out that legislative efforts in Congress might expand the CFTC’s responsibilities in overseeing crypto trading. But the agency would need additional regulatory tools such as registration, custody, surveillance, and oversight to do so effectively. Behnam added that a larger budget would be essential to acquire these capabilities.

“We don’t have those traditional regulatory tools – registration, custody, surveillance, oversight – that have really made American capital markets and derivative markets so strong,” Behnam stated. He highlighted the need for increased funding to enhance the CFTC’s regulatory framework.

But Gensler’s Working On It

Gary Gensler is working to establish a document with the Commodity Futures Trading Commission (CFTC) to enhance coordination on the regulation of digital assets.

In an interview , Gensler emphasized the potential for the two agencies to collaborate in maintaining market integrity. He noted the interconnected nature of securities and commodities in today’s trading landscape. “I’m talking about one rule book on the exchange that protects all trading, regardless of the pair – whether it’s a security token versus security token, security token versus commodity token, or commodity token versus commodity token.”

Gensler’s push for a unified regulatory approach aligns with legislative efforts to enhance the digital asset framework. Recent bills, such as the Digital Commodity Exchange Act and the Responsible Financial Innovation Act, propose expanding the CFTC’s authority. Senate Agriculture Committee members are also working on a bill to increase CFTC powers.

Having previously been chair of the CFTC, Gensler is skeptical about significantly changing the current regulatory structure. The SEC, traditionally the main crypto regulator, has faced criticism for focusing on enforcement rather than clear regulations.

This criticism stems from the fact that US regulators have collected over $3.35 billion from the crypto industry through enforcement actions, with 70% of this amount going to the SEC. Crypto industry leaders have been vocal in their calls for more transparent and well-defined regulations.

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