Ethereum ETFs pushed to May, Bitcoin ETFs approval in January: Law Decoded, Dec. 18–25
The United States Securities and Exchange Commission is pushing back its decision on several Ether (ETH) exchange-traded funds (ETFs) to May 2024. The agency delayed its decision on the Hashdex Nasdaq Ethereum ETF and the Grayscale Ethereum Futures ETF. The Hashdex Ether ETF aims to hold both spot Ether and futures contracts, while Grayscale’s Ethereum Futures ETF is seen as a “trojan horse” that would corner the SEC into allowing Grayscale to convert its Ethereum Trust to a spot Ethereum ETF. In the filings, the agency said it was instituting proceedings that involve gathering further public input around whether or not the ETFs should be listed. The agency also pushed back its decision on the VanEck spot Ethereum ETF and the spot Ethereum ETF lodged by Cathie Wood’s ARK Invest and 21Shares.
However, some analysts still expect approvals by early 2024 regarding Bitcoin (BTC) spot ETFs. Bloomberg ETF analysts James Seyffart and Eric Balchunas anticipate that the U.S. SEC will approve a spot Bitcoin ETF in January 2024 despite multiple last-minute amendments that applicants are scrambling to add to their proposals. Seyffart shared his observations about BlackRock’s latest spot Bitcoin ETF update, which accepted the SEC’s cash redemption system instead of in-kind redemptions or those implying non-monetary payments like BTC.
The analyst noted that multiple applicants, such as ARK, Bitwise and Valkyrie, have already set up a cash-only model, while some — including Grayscale and WisdomTree — still have in-kind or cash in their filings. In mid-December, finance lawyer Scott Johnsson predicted that ETF applicants would eventually have to bend their knee to using a cash creation and redemption model for their ETF.
Montenegro won’t extradite Do Kwon
A court in Montenegro has canceled the extradition approval of Terraform Labs co-founder Do Kwon to either the U.S. or South Korea. The High Court of Podgorica previously determined the legal requirements for Kwon’s extradition in November 2023, leaving the final decision on Kwon’s extradition to Montenegro’s minister of justice. According to the latest decision by the appeals court, Kwon’s defense has successfully appealed that decision, and the case should be returned to the Podgorica Basic Court for retrial. The panel of the appellate court specifically assessed that the previous decision by the High Court of Podgorica was affected by a “significant violation of the provisions” of Montenegro’s Criminal Procedure Code.
Binance will pay $2.7 billion to CFTC
A U.S. court has entered an order against crypto exchange Binance and its former CEO, Changpeng “CZ” Zhao, that will see Binance pay $2.7 billion and CZ pay $150 million to the Commodity Futures Trading Commission. The CFTC announced that the U.S. District Court for the Northern District of Illinois had approved the previously announced settlement and concluded the enforcement action first issued by the CFTC in November. “The court finds Zhao and Binance violated the Commodity Exchange Act (CEA) and CFTC regulations, imposes a $150 million civil monetary penalty personally against Zhao, and requires Binance to disgorge $1.35 billion of ill-gotten transaction fees and pay a $1.35 billion penalty to the CFTC,” wrote the CFTC in a statement. The approved settlement marks the conclusion of a long-running case against CZ and Binance by the CFTC. The agency sued the executive and his exchange for evading federal law and operating an illegal derivatives exchange.
China will tighten the regulations of online gaming
The General Administration of Press and Publication of China (GAPP) aims to restrict the scope of activities related to in-game tokens. The GAPP published a draft of its guidelines for the online games industry, suggesting physical goods purchases and the exchange of game tokens for legal tender should be banned. The guidelines contain 62 articles and cover a wide range of issues related to the regulation of online games. It proposes some stricter regulations: The companies will have to obtain a license in China, store their customers’ data for up to two years, ensure that their content complies with a list of national and socialist values, and expel any opportunity for anonymous registration of users.
Article 23 regulates the use of game tokens. It intends to ban the use of game tokens for buying physical goods, exchanging them for “products and services of other units” or “legal tender.” The latter point leaves room for speculation, given that cryptocurrencies don’t qualify as legal tender in China, and no specific mention of “crypto” is present in the guidelines. However, it appears the GAPP is trying to insulate online game economies from a tighter interchange with a real economy.