The U.S. Securities and Exchange Commission (SEC) recently enacted new listing standards for commodity-based trust shares, a significant policy shift poised to streamline the path for spot cryptocurrency Exchange Traded Funds (ETFs) to enter the market. This move has sparked considerable discussion within the financial industry, with proponents hailing it as a catalyst for innovation and critics raising concerns about investor safeguards.
Accelerating Crypto ETF Approvals
The SEC's updated policy, announced on September 17, is widely seen as a pivotal step towards a "wave of spot crypto ETP launches," according to Bloomberg ETF analyst James Seyffart. Experts like Eric Balchunas suggest the regulatory path for crypto ETFs is now clearer, particularly for those with futures listed on platforms such as Coinbase. This change is expected to drastically reduce approval times for digital asset ETFs, potentially from years to mere months, especially for assets not yet individually evaluated. Federico Brokate of 21Shares highlighted that "contemplated assets" would benefit from significantly increased predictability, no longer requiring lengthy S-1 and 19b-4 applications if they meet generic listing standards, allowing exchanges to list them directly.
Balancing Innovation with Investor Protection
Despite the optimism, the policy shift is not without its critics. Caroline Crenshaw, the sole Democratic Commissioner at the SEC, voiced strong objections, arguing that the new standards circumvent essential investor protection reviews. She expressed concerns that the resulting crypto ETFs would be "new and possibly untested products," emphasizing the SEC's mission to protect investors rather than expedite unproven investments. Conversely, academics like Seoyoung Kim from the University of Santa Clara maintain that "all pre-existing diligence requirements remain in effect," viewing the changes as clarifications rather than relaxations of robust, long-standing legal frameworks. Greg Benhaim of 3iQ also suggested that generic listing standards could ultimately empower average investors by helping them differentiate between various crypto assets, fostering a more informed retail market. Indeed, the immediate aftermath has seen asset manager Hashdex expand its crypto ETF to include XRP, Solana, and Stellar, with speculation of many more "eligible for spot ETF-ization" assets, highlighting the rapid impact of these regulatory adjustments.
