SEC hesitation says a lot. As the Bitwise push for Etfs Ethereum enabled for bets, regulators are deepening if passive cryptographic investors must gain performance or if it is a risk too far.
On June 30, the US stock and values commission announced that it would extend its review of Bitwise’s proposal to allow the rethinking within its spot ethhereum (Eth) ETF, delaying what could have been a historical change in cryptographic investment products.
The Securities Regulator now requests public feedback, specifically investigating whether betting rewards introduce hidden risks that traditional ETF structures were not designed to handle. Meanwhile, Bitwise, maintains that the reference can operate within the existing framework, offering investors an additional performance without altering the central mechanics of the fund.
A cautious commission in a rapid evolutionary market
The DEC decision to delay ETF proposal from Bitwiseum Ethereum reflects broader concerns about how Crypto’s native performance mechanisms conform to traditional financial structures.
While reestimation is essential for Ethereum’s stake test model, regulators question whether ETF wrappers, built for passive exposure, can safely include active participation in the Blockchain consensus.
Unlike traditional ETFs, the rethink introduces the risk of sanctions, known as “cuts”, if validators behave incorrectly. The agency is looking for clarity on whether such losses would be absorbed by fund or investor administrators, and how they would be mitigated.
Liquidity is another concern. The ETH states can be blocked for days or weeks during retreats, which increases the possibility of liquidity imbalance between ETF actions and underlying assets during market volatility.
The centralization of the validator is also under scrutiny. If the multiple ETFs through the same small group of institutional validators, such as Coinbase or Kraken, could create concentration risks that are executed against the decentralized spirit of Crypto.
Bitwise has responded that these risks are manageable, comparing rewards to dividends in ETF of capital. Even so, the DEC decision of requesting public comments indicates persistent skepticism, especially after prior compliance actions against rethinking programs such as Kraken’s performance offer.
