The US Securities and Exchange Commission recently approved new listing standards for commodity-based trust shares, a move that could potentially expedite the launch of spot crypto exchange-traded funds (ETFs). While this development has been hailed as a positive step by industry experts, some investors are still cautious about the implications.
Bloomberg ETF analyst James Seyffart believes that the SEC’s policy change, announced on Sept. 17, could pave the way for a wave of spot crypto ETP launches. This sentiment was echoed by Eric Balchunas, another senior ETF analyst at Bloomberg, who suggested that the regulatory path for crypto ETFs has been cleared, particularly for those with futures on Coinbase.
According to Seoyoung Kim, an associate professor of finance at the Leavey School of Business, the recent rule changes could significantly reduce the approval timeline for futures or spot ETFs for digital assets that have not been individually vetted. However, Kim emphasizes that the ETFs must still adhere to existing standards for formation, listing, and trading.
Federico Brokate, head of US Business at ETF issuer 21Shares, noted that the new listing standards offer more predictability for issuers and investors, leading to shorter approval times for in-scope assets. He highlighted that the requirement for both S-1 and 19b-4 applications has been eliminated for eligible assets, streamlining the listing process.
Are there any risks to ETF issuers or retail investors?
While the SEC’s move signals a more favorable stance towards the cryptocurrency industry, some concerns have been raised regarding investor protection. Democratic commissioner Caroline Crenshaw expressed reservations about the policy change, stating that it bypasses certain investor protection requirements and introduces new and unproven products to the market.
Despite these concerns, Santa Clara University’s Kim reassures that all pre-existing diligence requirements remain in place, emphasizing that the recent rule changes should be viewed as clarifications rather than a relaxation of regulatory standards. Greg Benhaim, executive vice president of product at digital asset manager 3iQ, believes that the generic listing standards could help investors differentiate between various assets and make informed decisions.
Following the announcement of the new listing standards, asset manager Hashdex has expanded its crypto ETF to include XRP, Solana, and Stellar. Analysts anticipate that more coins could soon follow suit, with 22 coins already deemed eligible for spot ETFs based on futures availability on Coinbase.