Grayscale and Bitwise Withdraw from Ethereum Futures ETF Plans

Updated: 19 May 2023

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Grayscale Investments and Bitwise Asset Management, two prominent crypto asset managers, have suspended their plans to launch an Ether (ETH) futures exchange-traded fund (ETF) in response to increased regulatory scrutiny in the United States.

On May 17, Grayscale submitted an amendment to the Securities and Exchange Commission (SEC), removing any references to an Ether futures ETF from their filing. This decision follows their recent announcement of a trio of ETF products, which included the Ether futures ETF, a semi-spot Bitcoin (BTC) ETF, and a privacy-focused ETF targeting blockchain companies and digital assets.

Grayscale just filed for a semi-spot bitcoin ETF, as well as Ethereum Futures ETF and a Privacy ETF. Interesting.. pic.twitter.com/MPruDolp7G

— Eric Balchunas (@EricBalchunas) May 9, 2023

The decision to halt the Ether futures ETF directly responds to the regulatory challenges and uncertainties surrounding crypto ETFs in the U.S. Grayscale Investments and Bitwise Asset Management are now likely reassessing their strategies and exploring alternative avenues to offer compliant crypto investment products.

Grayscale and Bitwise ETF Filings with the SEC

Grayscale amended its ETF filing shortly after the SEC asked the asset manager to withdraw its application for a Filecoin Trust. The SEC claimed that Filecoin (FIL) qualifies as a security, but Grayscale disputed this, stating that the underlying asset does not meet the definition of security. Grayscale intends to respond promptly to the SEC by explaining its legal position.

SEC tells Grayscale to withdraw the ether futures ETF filing, watch for the rest to follow suit, deja vu all over again. Scoop via ⁦@VildanaHajric⁩ pic.twitter.com/NUXy4pFfJi

— Eric Balchunas (@EricBalchunas) May 17, 2023

On the other hand, Bitwise completely withdrew its application to launch an ETH-based futures ETF. In its amendment filing with the SEC on May 17, the crypto asset manager stated it does not plan to seek the effectiveness of the fund and that no securities of the fund were sold or will be sold based on the mentioned amendment to the trust’s registration.

In the last quarter of 2021, a Bitcoin-based future ETF was launched, leading many individuals in the crypto industry to expect the arrival of a spot crypto ETF. However, because of the volatile nature of the crypto market and various market downturns in 2022, regulators have become increasingly cautious and skeptical about approving such products.

Grayscale Faces SEC Opposition on Filecoin Trust Application

Grayscale received a comment letter from the SEC regarding its application for the Grayscale Filecoin Trust. The SEC believes Filecoin should be classified as a security under federal law. The SEC requested Grayscale to withdraw its application for the trust product.Grayscale disagrees with the SEC’s classification and will respond promptly with its legal reasoning.

Grayscale is uncertain about the outcome and is considering alternative avenues to register the trust. In a worst-case scenario, Grayscale may have to dissolve the trust.

Furthermore, the asset management firm launched the Grayscale Filecoin Trust on March 17, 2021. The trust aimed to expose investors to Filecoin, a decentralized storage network. Grayscale had planned to make the trust more publicly accessible and file quarterly reports. The SEC’s opposition raises questions about the regulatory classification of digital assets.

The situation highlights ongoing complexities surrounding the legal status of digital assets. Market participants eagerly await the resolution of this matter. The outcome could have significant implications for cryptocurrency investments. Observers and stakeholders will closely watch Grayscale’s response to the SEC’s comment letter.