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Analysis-US SEC's Guidance on Crypto ETFs
New U.S. Securities and Exchange Commission guidance on disclosure requirements for exchange-traded products tied to cryptocurrencies marked the first step toward approval of dozens of applications for ETFs linked to various cryptocurrencies.
The guidance, issued last Tuesday, signaled a shift in how the top U.S. markets regulator deals with the crypto sector. The SEC has launched a task force to draft new regulations, refocused its crypto enforcement team, and paused or walked away from high-profile enforcement cases.
The 12-page document represents the initial framework for crypto funds that SEC staff members are developing. Asset managers also anticipate guidance from the SEC's division of trading and markets on streamlining the application process. This could accelerate the pace for new product debuts.
"The SEC is moving forward on creating a framework for how they'd like to see all these crypto assets included in investment funds," said Sui Chung, CEO of crypto index provider CF Benchmarks.
Industry participants noted the significance of the guidance.
"The most interesting and important thing about this guidance is that it exists," said Matt Hougan, chief investment officer of Bitwise Asset Management, which has several crypto ETFs awaiting SEC approval.
The SEC guidance specifies that issuers must clearly outline, in "plain English," all factors that make crypto-based ETFs distinctive, such as custody arrangements and risks.
The next document is likely to be more significant. According to several people familiar with the discussions, the SEC staff is looking to create a new listing template to replace the current requirement for exchanges to submit a special form for listing new crypto products. Removing this requirement could reduce the time between filing and launch from 240 days to only 75 days.
"The SEC is looking for a general rule it can apply to all listings," said a senior executive at one issuer.
While ETFs tied to various cryptocurrencies await an SEC verdict, issuers expect the next batch of crypto products will be tied to Solana.
Some asset managers are not waiting. REX Financial and Osprey Funds launched the first U.S. ETF to offer investors exposure to Solana through a more indirect and complex structure.
REX can bypass the rules governing those commodity funds, offering investors access to yield via the cryptocurrency "staking" mechanism.
In staking, cryptocurrency holders take part in validating transactions on the blockchain. Validators receive a share of transaction fees or newly created cryptocurrencies.
"We do think the SEC is taking big steps forward in dealing with cryptocurrency," Greg King, CEO of REX Financial, commented.
King is trying to get a head start on the competitive race for market share on new Solana products. The new ETF attracted $12 million of assets on its first day of trading.
"We'll probably do a spot Solana ETP too, once those rules are in place," he added.
This article has been published in reuters.com via Yahoo News.
