Ether (ETH) tumbled as much as 6% Wednesday as hopes dimmed for regulatory approval of a spot-based exchange-traded fund (ETF) in the U.S.
The second-largest crypto asset by market capitalization sank to $3,200. Bitcoin (BTC), the largest, dropped to around $62,000 after bouncing to near $64,000 earlier. The broad-market CoinDesk 20 Index (CD20) fell 3%.
Ether’s slide occurred after CoinDesk reported that network development organization Ethereum Foundation was under investigation by a “state authority.” Shortly after, Fortune reported that the U.S. Securities and Exchange Commission (SEC) is waging a campaign to classify the Ethereum blockchain’s native token as a security and started probing after Ethereum moved to a proof-of-stake network.
“I do think this relates to the ETF … The SEC has been in an untenable position for some time with its position on ETH,” said Scott Johnson, general partner at Van Buran Capital in a post on X. “This is in my opinion either an attempt to maintain its ambiguity for just a bit longer or the SEC is going nuclear option.”
Designating ETH as a security could complicate efforts to create ether ETFs in the U.S. The SEC has a May deadline to decide on approval. An analyst at Bloomberg Intelligence on Tuesday said he doesn’t expect such a fund to get approved by May, given the regulator’s lack of engagement with potential issuers – a contrast to the active conversations around spot bitcoin ETFs before they got the green light in January.
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