(Bloomberg) -- Crypto markets are increasingly optimistic about regulatory approval for US exchange-traded funds investing directly in Ether amid a flurry of activity at potential issuers, exchanges and the securities regulator.

The Securities and Exchange Commission requested that the New York Stock Exchange and Cboe Global Markets update so-called 19b-4 filings that propose rule changes to allow the planned funds to trade, according to people familiar with the matter who asked not to be identified since the matter is private. 

That’s a sign that prospects for SEC approval may be rising though a green light is by no means guaranteed, one of the people said. The agency also sought to have all filings resubmitted using the same language, one of the people said.

Updated documents were duly posted later Tuesday, including for ETFs from ARK 21Shares, Fidelity Investments, Invesco Ltd., Franklin Resources Inc. and VanEck.

Staking Scrubbed

Meanwhile, Fidelity Investments on Tuesday updated its S-1 registration statement with the SEC for its proposed spot-Ether ETF. 

Among other things, the issuer said it will keep the Ether it buys out of programs that pay rewards for blockchain maintenance — known as staking in the industry’s jargon — and that it will not invest in derivatives. 

Grayscale Investments LLC also scrubbed staking language for its proposed spot-Ether ETF. Staking has been a hot-button issue for Ether since it raises questions about whether the token should be treated as a security.

The increased activity among the SEC, investment firms and exchanges comes before a May 23 deadline for the regulator to approve or deny one application from VanEck.

“Given the political ‘backroom’ drama, approval will be seen as significant regulatory relief for the sector,” Bernstein analysts Gautam Chhugani and Mahika Sapra wrote in a note on Tuesday. “And ahead of US presidential elections, we would expect a softer regime.”

Ether Rally

Ether is the native token of the Ethereum blockchain, the most important commercial highway in crypto. The token has surged about 23% this week and was trading at approximately $3,780 as of 9 a.m. in Singapore on Wednesday.

“We expect significant ETF-driven inflows to ETH, as has been the case with BTC ETFs since their approval,” Standard Chartered analyst Geoff Kendrick wrote in a recent note. Kendrick estimated that the spot-Ether ETFs can lead to inflows of about $15 billion to $45 billion in the first 12 months after approval.

In January, the SEC faced a similar deadline for spot-Bitcoin ETFs and ended up approving 10 of the funds simultaneously. Those approvals were also preceded by a flurry of paperwork amendments requested by the regulator. A lack of similarly robust interaction with the regulator prior to Monday had led some issuers to brace for rejections, Bloomberg reported on May 17. 

The batch of new US Bitcoin ETFs have attracted almost $13 billion in net inflows to amass nearly $59 billion in assets since their launch on Jan. 11, and they have been hailed as one of the most successful product category debuts in the industry’s history. On April 30, Bitcoin and Ether spot ETFs also started trading in Hong Kong and are currently managing $294 million in assets. 

Read more: Hong Kong’s Shaky Crypto ETF Debuts Dent Global Hub Aspirations 

Fund Discount

Another sign that speculation of approval is growing can be seen in the Grayscale Ethereum Trust (ticker ETHE), which Grayscale Investments hopes to convert to an ETF if the SEC approves. 

The fund’s discount to its underlying Ether holdings has narrowed to less than 7% from Friday’s 20.5% and as much as 56% last year, data compiled by Bloomberg show. A similar pattern was seen in January before the SEC approved the conversion of Grayscale’s Bitcoin Trust, which is now trading on par with its underlying asset.

Ether prices began to take off on Monday after Bloomberg Intelligence ETF analyst Eric Balchunas increased his estimated probability of the ETF being approved by May 23 from 25% to 75%.

An SEC spokesperson said the agency doesn’t comment on individual filings. Spokespeople for NYSE, Nasdaq and Cboe declined to comment. Grayscale did not immediately return a request for comment. 

(Updates with the latest filings in the fourth paragraph.)

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