Crypto ETF Plans Halted: Regulatory Scrutiny vs Market Stability Debate

Intricate cityscape filled with modern architecture, grayscale color palette, subtle reflections of Ethereum & Bitcoin symbols, contrast of spotlights & shadows, tense atmosphere, financial experts & regulators engaged in a debate, sense of conflict between innovation & regulations, touch of abstract art, underlying hint of bearish market sentiment.

Two major crypto asset managers, Grayscale and Bitwise, recently halted their Ethereum futures exchange-traded fund (ETF) plans, following increased scrutiny from United States regulators. Grayscale filed an amendment with the Securities and Exchange Commission (SEC) on May 17 to remove mentions of the Ethereum futures ETF, just a week after announcing plans to launch three ETF products. These included a semi-spot bitcoin ETF investing in the spot BTC market and a privacy ETF focused on investing in privacy-centric blockchain companies and digital assets.

The SEC’s concerns extended to requesting Grayscale to withdraw its application for a Filecoin Trust, warning that its underlying asset, Filecoin, could qualify as a security. Grayscale responded on May 17, stating that the underlying asset does not qualify as a security and that it intends to provide the SEC with an explanation of the legal basis for its position.

Meanwhile, Bitwise opted to withdraw its application to launch an Ether-based futures ETF altogether. Their amendment filing with the SEC on May 17 stated that they no longer plan to seek the fund’s effectiveness and that no securities would be sold under the post-effective amendment to the trust’s registration statement.

The appearance of Bitcoin-based futures ETFs in late 2021 led many in the crypto industry to believe that a spot crypto ETF could soon emerge. However, almost two years later and with numerous crypto market downturns throughout the 2022 bear market, regulators remain increasingly skeptical about such products.

Despite these setbacks, proponents argue that a more regulated crypto sector could lead to increased adoption of cryptocurrencies by institutional investors, potentially stabilizing the market in the long run. On the other hand, critics believe that excessive regulation may stifle innovation within the crypto space, as it could create barriers to entry for smaller

Source: Cointelegraph

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