SEC Delays Decision on Multiple Crypto ETF Applications

By: Eliza Bennet

The United States Securities and Exchange Commission (SEC) has once again decided to postpone its verdict on several cryptocurrency exchange-traded fund (ETF) submissions. The delay impacts nine crypto ETF applications, with the focus squarely on prominent digital assets including Bitcoin, Ethereum, XRP, Litecoin, and Dogecoin. The decision reflects the SEC's ongoing efforts to lay down a cohesive framework governing digital asset products. The entities involved range from major financial firms including Truth, CoinShares, and 21Shares to emerging entities like Bitwise and Canary Capital, among others.

Market analysts believe these postponements align with the SEC's strategic maneuvering to craft well-defined criteria for approving cryptocurrency ETFs. The regulatory body has been engaged in discussions with various U.S. exchanges since July to introduce a universal listing standard for token-based ETFs. This upcoming framework could potentially replace the existing case-by-case review mechanism, streamlining the approval process for future digital asset ETFs.

The strategy involves offering a generic approach where if the underlying digital tokens of an ETF meet specific predetermined criteria, sponsors will be exempt from the traditional, cumbersome rule-change requests. Sponsors, instead, will be prompted to submit registration statements on Form S-1 while adhering to standard 75-day review periods. Metrics under consideration for this framework include market capitalization, on-exchange trading volume, and daily liquidity.

This proposed criterion sets a pivotal course for the cryptocurrency ETF sector, potentially leading to the first approvals of altcoin-related ETFs by October 2023. Both analysts and market participants broadly welcome the prospect of a set standard, setting clear guidelines and paving the way for a more streamlined approval process. Such a development could significantly foster increased acceptance and deployment of cryptocurrency-focused financial products.