BlackRock Argues for Equal Treatment of Spot-Crypto and Crypto-Futures ETFs

BlackRock, the world’s largest asset manager, has recently made a compelling argument for the U.S. Securities and Exchange Commission (SEC) to treat spot-crypto and crypto-futures exchange-traded fund (ETF) applications equally. The firm’s plan for a spot-Ether (ETH) ETF, called the “iShares Ethereum Trust,” has been officially confirmed, and BlackRock questions the SEC’s regulatory distinctions between futures and spot ETFs.

The SEC has so far approved several crypto futures ETFs but has not given the green light to any spot-crypto ETF applications. The regulator argues that crypto futures ETFs have superior regulation and consumer protections under the 1940 Act compared to spot-crypto ETFs, which fall under the 1933 Act. However, BlackRock contends that the SEC’s preference for the 1940 Act is irrelevant in this case, as it applies restrictions on ETFs and sponsors rather than the underlying assets.

BlackRock highlights that the SEC’s approval of crypto futures ETFs through the Chicago Mercantile Exchange (CME) demonstrates that the regulator believes CME surveillance can detect spot-market fraud that would impact spot ETFs. Therefore, BlackRock sees no valid reason for the SEC to reject their spot ETH ETF application based on its current reasoning.

The crypto and ETF community anticipate that the SEC will soon approve the first spot crypto ETF, with Bitcoin being the likely candidate. Bloomberg ETF analysts James Seyffart and Eric Balchunas predict a 90% chance of approval before January 10th next year.

As the SEC continues to evaluate the merits of spot-crypto ETF applications, the outcome of BlackRock’s argument may influence the regulator’s decision-making process. If the SEC recognizes the lack of distinction between spot-crypto and crypto-futures ETFs, it could pave the way for greater acceptance and adoption of digital assets in traditional investment portfolios.