Fidelity cites Grayscale’s court victory in filing for Ether ETF

abdelaziz Fathi

Fidelity Investments has submitted an application for a spot ether ETF to the U.S. Securities and Exchange Commission (SEC), following in the path of its earlier efforts to launch a spot bitcoin ETF.

The filing highlights the investor protection benefits amidst a landscape where U.S. investors are currently adopting higher-risk strategies to gain cryptocurrency exposure. “U.S. retail investors have lacked a U.S. regulated, U.S. exchange- traded vehicle to gain exposure to ETH,” it says.

Citing the recent Grayscale court decision, Fidelity’s filing points out inconsistencies in the SEC’s stance, noting the agency’s approval of futures-based crypto ETFs while rejecting spot-based ones. The asset management behemoth, with $4.5 trillion under management, is advocating for a regulated product that could mitigate risks associated with unregulated crypto entities, as seen with the failures of FTX, Celsius Network, and BlockFi.

“To this point, approval of a Spot ETH ETP would represent a major win for the protection of U.S. investors in the crypto asset space. If a Spot ETH ETP was available, it is likely that at least a portion of the billions of dollars tied up in those proceedings would still reside in the brokerage accounts of U.S. investors,” the filing reads.

A U.S. court ruled in September that the SEC was wrong in rejecting Grayscale’s application for a spot bitcoin exchange-traded fund (ETF). The court found that the agency’s denial lacked sufficient explanation for treating bitcoin futures ETFs differently from spot bitcoin ETFs.

Fidelity’s move comes hot on the heels of BlackRock’s foray into the spot Ether ETF arena, signaling growing interest from major asset managers in providing crypto-based products. The filing reveals that Fidelity intends to list the Fidelity Ethereum Fund on the Cboe BZX Exchange, offering investors a regulated avenue to invest in Ether.

The quest for a spot Ether ETF in the U.S. is gaining momentum, with Fidelity becoming the seventh firm to seek SEC approval, joining others like VanEck, 21Shares, ARK Invest, Hashdex, Grayscale, and Invesco Galaxy. This move suggests a growing appetite for crypto investment vehicles in the traditional finance sector, despite the SEC’s historical reluctance to approve them.

Earlier in October, Fidelity made revisions to its Bitcoin spot exchange-traded fund (ETF) application. The revised filing from Fidelity’s Wise Origin Bitcoin Trust delves into the strategies to secure customers’ bitcoin in custody accounts. Additionally, it highlights the nuanced risks stemming from the ambiguous regulatory landscape surrounding cryptocurrencies.

Key highlights from the amendment revolve around the risks tied to the product. This ETF is structured to offer investors a gateway to Bitcoin, without the need for direct ownership, by trading shares on a stock exchange.

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