The US Securities and Exchange Commission has approved new generic listing standards for spot cryptocurrency ETFs and other commodity-based exchange-traded products. The new rules will make it easier to launch new crypto funds across Nasdaq, NYSE Arca, and Cboe BZX.
Before the change, spot crypto fund issuers faced a lengthy approval process that required SEC review for each individual product. Now, new crypto ETFs can be launched automatically if they meet the basic requirements.
The significance of the new standards
Since the SEC approved spot crypto in January 2024, the funds have enjoyed incredible returns. BlackRock’s Bitcoin ETF is now generating more revenue than its flagship fund, the iShare Core S&P 500 ETF (IVV), with over $100 billion (A$153 billion) AUM.
Overall, the 12 current providers have amassed over 1.3 million Bitcoin, valued at over 5% of the total supply. The streamlined approval and shorter launch timelines are expected to cause a wave of spot crypto ETFs.
Prior to the new rules being rolled out, investors could only access Bitcoin and Ether ETFs, the two largest cryptocurrencies by market cap. Now investors can access a wide range of altcoins.
The new standards came with the approval of the first multi-crypto asset ETF in the US, the Grayscale Digital Large Cap Fund, which also holds Solana, XRP, and Cardano. Investors will have access to as many as 15 coins, including memecoin ETFs such as Dogecoin.
“It was expected, but big, because it’s gonna mean that about 12 to 15 coins are good to go,” said Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence. “It’s going to be real nice for investors to have 33 Act spot ETFs with reasonable fees and low trading spreads in the ETF wrapper, which has been vetted by the SEC. It’s a beautiful thing.”
For investors, it presents an opportunity to gain exposure to altcoins without needing to purchase crypto from a digital wallet or exchange. Holding crypto through a spot ETF fund is also safer than holding it on exchanges.
Investors are also excited about the possibility of more institutional investors investing in cryptocurrency. If this happens, it could increase the value of their digital assets and help make markets less volatile.
A crypto-friendly White House
Under President Trump, the US has the most pro-crypto administration in history. While Biden’s SEC was slow-acting and wary of digital assets, the current chair has embraced cryptocurrency with open arms.
“This approval helps to maximise investor choice and foster innovation by streamlining the listing process and reducing barriers to access digital asset products within America’s trusted capital markets,” said SEC Chairman Paul S. Atkins in a press release announcing the new standards.
It took the SEC 11 years since the Winklevoss brothers filed the first bitcoin ETF for the agency to finally grant its approval, and only a little over a year and a half since then to blow the market wide open with the latest rule change.
During the OECD’s inaugural roundtable on global financial markets in Paris, Mr Atkins declared crypto’s time has come. He promised to usher in a new pro-crypto approach at the agency.
“For too long, the SEC has weaponised its investigatory, subpoena, and enforcement authorities to subvert the crypto industry,” he said.
It should, however, be noted that in the later years of the Biden administration, the SEC had already started to pivot from the enforcement-heavy strategy that followed the collapse of FTX. Notably, it was under the leadership of former Chair Gary Gensler that the SEC approved the first spot crypto ETFs in 2024.
This change came just as the presidential campaigns were starting to heat up, with crypto investors seemingly flooding the Trump campaign. For his part, President Trump has kept his promise to make the US the “crypto capital” of the world.
When are the new products expected to launch?
The first spot crypto ETFs under the new standards are expected to launch as soon as October. Most of these are XRP and Solana spot ETF funds that the SEC shelved to focus on Bitcoin and Ether.
Speaking to Reuters, Steve McClurg, CEO of Canary Capital, said that while this was a great start, there is still a lot of work to be done. His company has multiple spot crypto ETFs currently waiting for approval.
“Marketing plans, legal filings, and work with service providers all have to be addressed, based on the new roadmap,” he said. Others expect mass approvals of crypto ETFs by the SEC in October. “We’re gonna be off to the races in a matter of weeks,” reacted James Seyffart, a researcher at Bloomberg Intelligence, reacting to the SEC news.
What’s next for crypto ETFs?
At the moment, the sky seems to be the limit for the crypto industry. Bitcoin is hitting all-time highs, and new standards are only going to strengthen crypto prices as more investors gain exposure.
But not everyone is happy with the latest changes. SEC commissioner Caroline Crenshaw has accused the regulator of passing the buck on reviewing proposals to list and trade crypto ETPs. She noted the novelty of crypto ETFs and argued that the new standards further eroded the distinction between ETPs and ETFs.
“Another reason I do not believe generic listing standards are appropriate for digital asset ETPs at this time is due to the unique risks that still exist in the underlying crypto spot markets,” she added.
Despite the ongoing debate about the risks of spot crypto ETFs, interest continues to skyrocket as more investors seek exposure to digital assets without having to deal with the exchanges, private keys, and wallets. Over the next few years, spot crypto ETFs may help bridge the gap between traditional finance and the decentralised world of cryptocurrency.
