Last week, the US Securities and Exchange Commission approved updated listing standards for commodity-based trust shares, which marks a notable policy shift that may expedite the process of launching spot crypto exchange-traded funds (ETFs). However, uncertainty remains for various investors.
Bloomberg ETF analyst James Seyffart asserted that this policy change, announced by the SEC on September 17, represents a favorable step towards a surge of spot crypto ETP launches.
Eric Balchunas, another senior ETF analyst at Bloomberg, indicated that the SEC has effectively cleared the regulatory path for crypto ETFs “as long as they have futures on Coinbase,” alluding to the varied regulations applicants will encounter based on the type of investment vehicle they intend to provide.
Seoyoung Kim, an associate professor of finance at the Leavey School of Business at Santa Clara University, shared with Cointelegraph that “for a new futures or spot ETF in an already ‘legitimized’ category (BTC, ETH), these recent rule changes have little to no impact on approval timelines.”
“However, for a futures or spot ETF concerning digital assets that haven’t been individually vetted, these changes could significantly shorten the approval time from years to months. Nevertheless, the proposed ETF must still adhere to established standards for formation, listing, and trading.”
Federico Brokate, head of US Business at ETF issuer 21Shares, noted that the new “in-scope assets” criteria in the listing standards would provide “far more predictability for issuers and investors,” leading to marked reductions in approval timelines.
“The S-1 and 19b-4 [applications] are no longer required for in-scope or eligible assets,” stated Brokate. “Now, if a product aligns with standard criteria such as qualifying through existing futures or analogous structures, an exchange can list it directly.”
Related: SEC approves generic listing standards for quicker crypto ETF approvals
Are there any risks to ETF issuers or retail investors?
The SEC has been scaling back on enforcement actions against cryptocurrency firms while generally adopting policies that favor the sector, prompting concerns about potential risks to investor protection.
Caroline Crenshaw, the only Democratic commissioner at the SEC, remarked after the listing standards announcement that the policy shift sidestepped critical requirements intended to safeguard investors. She expressed concern that the forthcoming crypto ETFs might represent “new and arguably untested products.”
“Ultimately, our mission is to protect investors — not to expedite the listing and trading of unproven investment products,” Crenshaw emphasized.
Kim countered that “all existing diligence requirements remain intact,” stating that the rule changes “should be seen as clarifications.” She added:
The extensive requirements established by the ’33 and ’40 acts are still applicable and have not been mitigated by the SEC’s recent decisions.
Greg Benhaim, executive vice president of product at digital asset manager 3iQ, stated in a communication shared with Cointelegraph that the generic listing standards could help ordinary investors better differentiate among various coins.
“For instance, an AVAX ETF and an ADA ETF are quite distinct, although the investor may not fully grasp this,” noted Benhaim. “Over time, this could enable the industry to identify assets that are significantly appealing to retail investors in ETF form versus those that aren’t.”
Following the adjustment in listing standards, asset manager Hashdex has broadened its crypto ETF to incorporate XRP (XRP), Solana (SOL), and Stellar (XLM). Nevertheless, Balchunas and others have speculated that many more could emerge soon, pointing to 22 coins with futures on Coinbase that could potentially be designated for spot ETFs.
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