The Securities and Exchange Commission (SEC) made headlines on Aug. 18 when they delayed decisions on nine crypto exchange-traded fund (ETF) applications. This move extended review periods for products related to digital assets, including Bitcoin, XRP, Litecoin, and Dogecoin. The reason for the delays is believed to be the SEC’s efforts to establish a comprehensive digital asset framework.
The postponed applications include Truth’s spot Bitcoin and Ethereum ETF, CoinShares’ spot Litecoin ETF, and multiple XRP ETF applications from 21Shares, CoinShares, Bitwise, Canary, and Grayscale. Additionally, the SEC delayed 21Shares’ staking proposal for its spot Ethereum ETF and Grayscale’s spot Dogecoin ETF application. With the exception of Truth’s filing, the delayed products all have final deadlines set for October.
Analysts from Bloomberg ETF, Eric Balchunas, and James Seyffart, suggested back in July that the delays indicate the SEC’s strategy to set approval criteria before granting individual applications. Seyffart mentioned that this approach could be the SEC’s way of delaying the approval of these ETFs until they have established a digital assets ETF framework. This framework would outline generic listing standards for digital assets allowed in an ETF wrapper and the criteria for their use.
The SEC has reportedly been working with US exchanges since July on developing generic listing standards for token-based ETFs to eliminate the need for individual rule-change requests. This proposed system would allow ETF sponsors to bypass the traditional Form 19b-4 process if the underlying tokens meet predetermined criteria. Market capitalization, on-exchange trading volume, and daily liquidity are among the metrics being discussed.
Seyffart believes that this generic standard approach is positive news for the crypto ETF space, as it would provide clear rules for sponsors to follow. He anticipates that the first altcoin-related ETF approvals may only begin in October as a result of these developments.
Overall, the SEC’s delays on crypto ETF applications signal a shift towards a more structured and comprehensive framework for digital assets in the ETF space, offering clarity and consistency for market participants.