Mar 1, 2024

CoinDesk Managing Editor of Global Policy and Regulation, Nik De, weighs in on the legal path ahead for spot ETH ETF issuers.

Video transcript

This spot. Bitcoin ETF update is presented by Grayscale, the world's largest crypto asset manager with the spotlight on the potential for spot E ETF. This year coin Desk's managing editor of Global Policy and Regulation. Nick Day joins us now to talk about the legal path ahead. Nick. Welcome back to first mover. I have missed you dearly can react. All right, it took 10 years to get the spot. Bitcoin ETF approved. Now, the industry is very hopeful for a spot E ETF uh this spring summer. What's your perspective there? What are folks saying to you? It seems that people are, I would say more optimistic than not about the chances of a spot E ETF getting approved. Uh the date to look out for is uh late May. So you have a couple of months left of filings or whatnot. But in the next uh I would say, you know, couple weeks, we should start to see the flurry of activity that preceded the Spot Bitcoin ETF approval. And that's really what's gonna tell us, you know, if we start seeing uh issuers or would be issuers uh start to update their filings and you know, all those small little ways that the spot Bitcoin ETF issuers were uh right before that approval in January, then that'll probably be a really good sign that it is gonna happen or it's more likely to happen at least once we get to that May, I think it's May night that like now uh spot E ETF issuers are reportedly supposed to meet with the SEC this month. Tell me a little bit more. What can we expect from these meetings? Is it going to be very similar to what we saw with the Bitcoin ETF S? Well, that's what, you know, what we're keeping an eye out for is, you know, if after these meetings, we start seeing the issuers start to add little details about, you know, the fees and the custodians and all those little things that I, you know, we saw with the Bitcoin ETF applications, then it shows that there is dialogue happening that the dialogue is progressing. Um If we start seeing takers at it, if we start seeing uh the various, you know, parties that are gonna be supporting the ETF S being closed, um All of those are the, you know, those details that will be, you know, hopefully seeing uh or not as the case may be. Now, Nick, could it be a little bit more complicated? Could the question come up of whether it is a security or not that thus making this um application a little bit more complicated than the Bitcoin application was. Yeah, absolutely. So, uh you know, we've had, we've talked before about how the sec views certain cryptocurrencies. It has been kind of in this weird place where we know that at least pre merged before it was on this proof of state consensus algorithm. Um It was pretty much accepted as not being in security post merge now to move to proof of stake. Uh It's been a little bit more uh unclear, I would say where you have SEC chair, Gary Gensler, not outreach stating, but suggesting that it is perhaps more likely to be a security. Now, we haven't seen it mentioned in any of the lawsuits that the SEC has brought against crypto exchanges. So the cases against coin base cracking BB US, they don't mention es they do mention other cryptocurrencies as being securities or unregistered securities in the S ECs view and the fact that we haven't seen it honestly, it's hard to say what to make of that, but what is likely to happen if the TC rejects the E ETF S, especially if they say, well, we think this might be a unregistered security. Um It's probably the same thing we saw when the SEC rejected the gray scale between ETF conversion application, meaning, you know, someone's gonna sit and that's when uh if that happens, that's when I think we'll probably start seeing a lot more about. Yeah, just that discussion of whether or not it is in uh a security in the SEC view. Now, I'm curious if you think that the EF ETF is going to come up in the conversation here when that was approved? We had analysts on first movers say that this kind of solidifies e as a commodity and not a security, but like you've just mentioned, Nick, it's kind of murky waters. Do you think that that's going to come up as we anticipate an approval in May? I would be really surprised if it doesn't. Um, certainly if the SEC decides to reject a spot Ether ETF, for any reason, we're gonna see a lawsuit and they're gonna make the same argument that gray scale made, which is, how are you able to approve a futures Ether ETF, uh which has the same underlying data, the same, you know, pricing data, uh based on the same, you know, underlying asset, uh, if you are going to reject a spot. So, um, yeah, the argument is gonna be, it's either the same, you know, you can't argue market manipulation. Uh We saw how that worked out with the Bitcoin ETF, uh, you know, lawsuit. Um Maybe you can say, oh, it's a security but, uh, you know, it still raises the same question. So just the fact that they're, you know, the fact that it is a thing is gonna make it a lot more difficult, I think for the SEC to reject a spot Ether application or you know, several without us going through, uh, you know, the same, you know, grounds of legal filings lawsuits. And I mean, without you, I, I'm not gonna predict what the lawsuits are gonna result in, but I would say the chances are pretty good that a court of appeals is gonna, you know, make a similar argument or a similar decision to when the Bitcoin ETF applications were being, uh, f all right, we are gonna keep an eye on what's going on with the spot. E ETF and Nick. Hopefully we'll have you back as there are more legal developments. Thanks for joining. Thank you. That was Coin Desk's managing editor of Global Policy and Regulation, Nick Day.

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