- Rhode Island Senator Jack Reed and California Senator Laphonza Butler penned an impactful letter to Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC).
- Senators Reed and Butler, expressing skepticism about the suitability of these assets for ETPs, highlighted potential risks to retail investors.
- Another significant point emphasized in the letter pertains to naming conventions used in SEC filings and investor documents.
SEC May Not Approve Spot Ethereum ETFs in the US: Recent Developments Lower Approval Odds Further!
Spot Ethereum ETFs Don’t Have a Bright Future
Rhode Island Senator Jack Reed and California Senator Laphonza Butler penned an impactful letter to Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC). In the letter, they called for careful scrutiny and a cautious approach in the approval process of crypto ETFs. This situation has created uncertainty surrounding the approval of Spot Ethereum ETF applications from organizations like Grayscale, BlackRock, VanEck, and Franklin Templeton.
Advocating for a cautious approach, the senators expressed concerns about market integrity and investor protection by opposing the blind approval of crypto ETPs, calling for strict limitations on such approvals akin to pioneering practices. Furthermore, they claimed that markets for such ETPs do not have the trading volume and integrity to support them for other cryptocurrencies.
The senators underscored, “Lastly, we believe that the SEC should narrowly tailor its pioneering approvals.” Therefore, the likelihood of the SEC approving Spot Ether ETFs in May has significantly diminished. Additionally, the letter warned of risks posed by illiquid cryptocurrencies and those susceptible to pump-and-dump or other fraudulent schemes.
Additionally, Senators Reed and Butler, expressing skepticism about the suitability of these assets for ETPs, highlighted potential risks to retail investors. They urged caution amidst increasing risks by emphasizing the SEC’s discretion in approving these products. The letter concluded, “Retail investors will face significant risks from ETPs referencing illiquid cryptocurrencies or those particularly susceptible to pump-and-dump or other fraudulent schemes.”
Previously, Bloomberg ETF expert Eric Balchunas significantly reduced the likelihood of Spot Ethereum ETF approval from 60-70% to as low as 30%. This decline in optimism coincided with market dissatisfaction with how the SEC is handling Ethereum ETF applications.
Furthermore, the SEC’s participation and silence on the matter have ultimately led to uncertainty about what the market will ultimately decide. Therefore, if the regulatory agency decides to comply with the demands of US senators, the likelihood of rejecting Spot Ethereum ETF applications from giants like BlackRock, Grayscale, and others could be on the table. Additionally, the possibility of approving XRP, SHIB, or TRX ETFs could also be eliminated.
Reviewing Bitcoin ETFs
Senators Reed and Butler highlighted a need for clarity in terms and suggested that Bitcoin ETF proposals should be referred to as Exchange Traded Products (ETPs) rather than ETFs. They emphasized the importance of ensuring investors receive complete and accurate information about crypto ETPs. Additionally, these US senators called for a close examination of broker communications to reduce the risk of misinformation.
Furthermore, the senators emphasized the regulatory obligation to protect investors’ interests. They stressed that the SEC should review brokers and advisors recommending crypto ETPs to ensure they act in the best interests of their clients. Additionally, they underscored the importance of reviewing advisors recommending crypto ETPs to ensure compliance with SEC regulations.
Another significant point emphasized in the letter pertains to naming conventions used in SEC filings and investor documents. Senators Reed and Butler call for measures to ensure Bitcoin ETFs do not use misleading or confusing naming conventions, thereby enhancing transparency and clarity for investors.
