Two U.S. senators have urged U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler to refrain from approving additional crypto exchange-traded fund (ETF) applications. The lawmakers cautioned: “However vulnerable bitcoin may be to fraud and manipulation, markets for other cryptocurrencies are far more exposed to misconduct.”
US Senators Push SEC to Stop Approving Spot Crypto ETFs — Say Other Crypto Markets Risker Than Bitcoin
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Lawmakers Say SEC Should Not Approve Spot Crypto ETFs
U.S. senators Jack Reed (D-RI) and Laphonza Butler (D-MS) wrote a letter to the chairman of the Securities and Exchange Commission (SEC), Gary Gensler, earlier this week regarding the Commission’s potential approval of crypto exchange-traded funds (ETFs).
“We write to urge the Securities and Exchange Commission (SEC) to take steps to protect investors following its recent approval of the listing and trading of certain spot bitcoin exchange-traded products (ETPs),” the senators began.
Noting that the securities regulator approved 11 spot bitcoin ETFs in early January, the senators told Gensler:
We believe the SEC should strictly limit the precedential application to these approvals … The Commission is under no obligation to approve such products, and given the risk, it should not do so.
“While the bitcoin market has displayed serious weaknesses, it is nonetheless far more established and scrutinized than the market for any other cryptocurrency … We do not believe that other cryptocurrencies show the trading volumes or integrity to support associated ETPs,” the lawmakers explained. “However vulnerable bitcoin may be to fraud and manipulation, markets for other cryptocurrencies are far more exposed to misconduct.”
The senators also urged the SEC to “take several specific steps” to address the risks posed by the spot bitcoin ETFs already approved. They specifically asked the SEC to “carefully scrutinize brokers’ and advisors’ communications regarding bitcoin ETPs,” “examine brokers and advisors that recommend cryptocurrency ETPs,” and “ensure that bitcoin ETPs do not use inappropriate and confusing naming conversions.” The lawmakers claimed that these steps “would help protect investors from fraud and abuse, which may be enabled by the current light-touch regulatory regime applicable to bitcoin ETPs.”
The letter continues:
Retail investors would face enormous risks from ETPs referencing thinly traded cryptocurrencies or cryptocurrencies whose prices are especially susceptible to pump-and-dump or other fraudulent schemes.
The SEC currently has about 10 spot ether ( ETH) ETF applications pending. May is the first deadline for the Commission to decide whether to approve a spot ether ETF. While some are optimistic about the approval, including Standard Chartered Bank, others are skeptical because Gensler has consistently refrained from publicly stating whether ether is a security or a commodity. He has repeatedly stated that most crypto tokens are securities.
U.S. spot bitcoin ETFs have become one of the most in-demand ETPs. They are frequently hitting record trading volumes and have seen massive inflows. Notably, excluding Grayscale’s Bitcoin Trust (GBTC), the nine U.S. spot bitcoin ETFs that were launched on Jan. 11 have made record flows, exceeding all other ETFs year-to-date.
What do you think about the senators urging the SEC to refrain from approving any more spot cryptocurrency ETFs? Let us know in the comments section below.
