The US Securities and Exchange Commission approved new listing standards for commodity-based trust shares last week, a policy shift that could shorten the path to launching spot crypto exchange-traded funds (ETFs), but questions remain for some investors.
Bloomberg ETF analyst James Seyffart said the policy change, announced by the SEC on Sept. 17, would be a positive move toward a “wave of spot crypto ETP launches.”
Eric Balchunas, another senior ETF analyst at Bloomberg, suggested that the SEC had just cleared the regulatory tape for crypto ETFs “so long as they have futures on Coinbase,” hinting at the different regulations that applicants will face depending on the investible vehicle they plan to offer.
Source: Jake Chervinsky
“For a new futures or spot ETF in an already ‘legitimized’ category (BTC, ETH), these recent rule changes have little to no bearing on time to approval,” Seoyoung Kim, an associate professor of finance at the Leavey School of Business at Santa Clara University, told Cointelegraph.
“However, for a futures or spot ETF for digital assets that haven’t already been individually vetted, these rule changes could cut down the time to approval from years to months. Of course, the would-be ETF must still comply with pre-existing standards for ETF formation, listing, and trading.”
Federico Brokate, head of US Business at ETF issuer 21Shares, said “in-scope assets” in the listing standards would have “far more predictability for issuers and investors,” resulting in significantly shorter approval times.
“No longer are both the S-1 and 19b-4 [applications] required for in-scope or eligible assets,” said Brokate. “Now, if a product meets the generic standards such as qualifying through existing futures or comparable structures, an exchange can list it directly.” is
Are there any risks to ETF issuers or retail investors?
The SEC has been cutting back on enforcement actions against cryptocurrency companies and generally adopting policies favoring the industry, which some argue could come at the cost of investor protection.
Caroline Crenshaw, the sole Democratic commissioner at the SEC, said after the announced listing standards that the policy change bypassed requirements for reviewing investor protection. She added that the crypto ETFs likely to arise from the policy were “new and arguably unproven products.”
“Our mission, after all, is to protect investors — not to fast-track untested investment products for listing and trading on exchange,” said Crenshaw.
Santa Clara University’s Kim argued that “all pre-existing diligence requirements are still in place,” adding that the rule changes “can be better viewed as clarifications.” He said:
The longstanding extensive requirements from the ’33 and ’40 acts are still in place and have not been lessened by the recent decisions of the SEC.”
Greg Benhaim, executive vice president of product at digital asset manager 3iQ, said in a statement shared with Cointelegraph that the generic listing standards could assist average investors in distinguishing which coins to buy.
“For example, an AVAX ETF and an ADA ETF are very different but the investor may not appreciate this fully,” Benhaim said. “Over the long term, this will pave the way for the industry to identify which assets have significant retail appeal in ETF format and which don’t.”
In the week since the change in listing standards, asset manager Hashdex has expanded its crypto ETF to include XRP (XRP), Solana (SOL) and Stellar (XLM). However, Balchunas and others have speculated that there could be many more soon, pointing to 22 coins with futures on Coinbase that were “eligible for spot ETF-ization.”