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VanEck, 21Shares, and Canary Capital have jointly petitioned the SEC to reinstate the “first to file, first to approve” principle in the cryptocurrency ETF approval process, aiming to restore predictability and fairness.
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This move comes in the wake of the SEC’s recent approval of multiple spot Bitcoin ETFs, where the traditional chronological review order appeared to be set aside, causing uncertainty among applicants.
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According to COINOTAG, the firms emphasize that reinstating this principle could streamline regulatory reviews and incentivize early, high-quality filings, benefiting both issuers and investors.
VanEck, 21Shares, and Canary Capital urge the SEC to return to “first to file, first to approve” for crypto ETFs, promoting clarity and fairness in the regulatory process.
Reinstating “First to File, First to Approve”: A Strategic Move for Crypto ETF Regulation
The cryptocurrency exchange-traded fund (ETF) landscape is at a pivotal juncture as major asset managers seek to influence the Securities and Exchange Commission’s (SEC) regulatory framework. The “first to file, first to approve” principle, historically used by the SEC to prioritize ETF applications by submission order, is at the center of this debate. VanEck, 21Shares, and Canary Capital’s recent letter to the SEC underscores their collective interest in reinstating this principle to enhance transparency and predictability in the approval process.
This principle essentially functions as a queue system, where the earliest compliant application receives priority review. Its reinstatement could reduce ambiguity for firms investing significant resources in preparing ETF filings, particularly in the rapidly evolving crypto asset class. The firms argue that this approach not only rewards preparedness but also fosters a more orderly and efficient regulatory process, which is crucial given the complexities inherent in crypto ETFs.
Historical Context and SEC’s Departure from Chronological Review
Traditionally, the SEC adhered to the “first to file, first to approve” rule across various ETF categories, including Bitcoin futures ETFs. However, the approval of multiple spot Bitcoin ETFs in January 2024 marked a departure from this norm. Despite staggered filing dates, the SEC approved several applications concurrently, reflecting a more flexible, case-by-case review strategy.
This shift was likely driven by the SEC’s need to evaluate market readiness and investor protection comprehensively, rather than strictly following filing order. While this approach allowed simultaneous market entry of multiple products, it introduced uncertainty for applicants regarding their relative standing in the approval queue. The letter from VanEck and its partners highlights this uncertainty and advocates for a return to a more predictable framework.
Industry Implications: Predictability Versus Regulatory Prudence
The push to reinstate the “first to file, first to approve” principle carries significant implications for the crypto ETF market. On one hand, it promises increased efficiency by providing applicants with clearer timelines and incentivizing early, high-quality submissions. This could encourage innovation and competition, ultimately benefiting investors through a broader selection of regulated crypto investment products.
On the other hand, the SEC must balance these benefits against the unique challenges posed by crypto assets. Factors such as custodial risks, valuation complexities, and potential market manipulation require thorough and sometimes simultaneous review of multiple applications to establish best practices. The regulator’s cautious approach aims to safeguard market integrity and investor interests in a volatile environment.
Potential Outcomes and Market Impact
If the SEC reinstates the “first to file, first to approve” principle, it could streamline the approval process for upcoming crypto ETFs, including those based on Ethereum and other digital assets. This would likely reduce the current unpredictability that firms face and could accelerate the introduction of new products to the market.
Conversely, maintaining a flexible review process might allow the SEC to better assess the evolving crypto landscape and ensure that only the most robust and compliant products reach investors. The decision will signal how the SEC balances innovation with regulatory oversight in this nascent sector.
Conclusion
The joint appeal from VanEck, 21Shares, and Canary Capital represents a strategic effort to bring clarity and structure to the SEC’s crypto ETF approval process. By advocating for the reinstatement of the “first to file, first to approve” principle, these firms seek to foster a more transparent and efficient regulatory environment that rewards early and thorough preparation.
While the SEC’s ultimate decision remains pending, this development highlights the ongoing dialogue between regulators and industry leaders striving to shape the future of crypto financial products. Market participants should monitor forthcoming SEC communications closely, as the outcome will influence the pace and nature of crypto ETF offerings in the near term.
