The Securities and Exchange Commission (SEC) is collaborating with US exchanges to develop a generic listing framework for token-based exchange-traded funds (ETFs), aiming to streamline the process for issuers. This initiative could potentially eliminate the need for individual rule-change requests, as reported by Fox News on July 1.
Under this proposed framework, an ETF sponsor would be able to forgo the traditional Form 19b-4 process if the underlying token meets specific criteria. Instead, the sponsor would submit a registration statement on Form S-1, undergo the standard 75-day review period, and list the product once the waiting period is over. Metrics such as market capitalization, on-exchange trading volume, and daily liquidity are among those being discussed.
The current rule-change pathway requires each spot crypto ETF to obtain a Commission order before listing, a step typically reserved for novel or complex products. Transitioning to a standing rule for qualifying assets could expedite timelines and reduce the back-and-forth communication between the SEC and applicants.
ETF analysts from Bloomberg have expressed optimism about this development, with James Seyffart noting that a generic standard would be a significant positive for the crypto ETF space, providing much-needed regulatory clarity. Eric Balchunas echoed this sentiment, emphasizing the importance of clear rules for market participants.
The analysts also anticipate a surge in multi-asset index and basket ETFs in the second half of the year, with funds for popular cryptocurrencies like Dogecoin, Cardano, Polkadot, and Avalanche expected to have a high probability of approval. Grayscale’s crypto basket fund recently received SEC approval for conversion into an ETF, signaling growing acceptance of digital asset investment vehicles.
Looking ahead, the analysts have raised the approval odds for ETFs based on Solana, Litecoin, and XRP to 95% by 2025, citing increasing institutional interest and the supportive stance of the current US administration towards crypto assets. This trend towards regulatory clarity and expanding investment options bodes well for the future of crypto ETFs.
In conclusion, the SEC’s efforts to establish a generic listing framework for token-based ETFs could pave the way for a more efficient and transparent process, benefiting both issuers and investors in the cryptocurrency market.