Democratic Senators Call for Strict Limitations on Crypto ETF Approvals
Two Democratic senators, Laphonza Butler and Jack Reed, have written a letter to the United States Securities and Exchange Commission (SEC) Chair Gary Gensler, urging him to โstrictly limitโ the approval of cryptocurrency-based exchange-traded funds (ETFs). The senators claim that cryptocurrencies pose significant risks to the American people and express concerns about the sale of volatile crypto investments to ordinary Americans through their brokerage and retirement accounts.
The senators also reference a report from the Financial Industry Regulatory Authority (FINRA) that revealed approximately 70% of brokersโ communications to retail investors regarding cryptocurrencies violated fair disclosure rules. This raises concerns that incomplete or deceptive information may be provided about bitcoin exchange-traded products (ETPs) to retail investors.
Possible Approval of a Spot Ethereum ETF
Butler and Reedโs letter comes after the SEC approved several spot bitcoin ETFs in January, which led to a surge in bitcoinโs price. Currently, there is speculation about the potential approval of a spot Ethereum ETF by the SEC. However, experts suggest that the chances of approval in May are only around 35%.
โThe blockbuster success of the Bitcoin ETF is upsetting to high-ranking Dems,โ wrote Bloomberg Senior ETF Analyst Eric Balchunas. โBuyerโs remorse. This is part of why we are pessimistic re spot Eth etf approval chances.โ
Concerns About Communication Regarding ETFs
In addition, Butler and Reed argue that bitcoin ETFs should be referred to as exchange-traded products (ETPs) due to the lack of restrictions on harmful practices that apply to most investment funds marketed to retail investors. They highlight limits on leverage, custody requirements, and examination by the SEC as examples of these restrictions. The senators express concerns about the confusion caused by using the term โETFโ and request that Gensler closely monitor communications from brokers and advisors regarding ETFs.
They also urge Gensler to ensure that Bitcoin ETFs do not use inappropriate and confusing naming conventions in official filings. The senators believe that these steps would help protect investors from fraud and abuse enabled by the current regulatory regime applicable to Bitcoin ETPs.
No Response from Gensler Yet
As of now, Gensler has not publicly responded to the letter from Butler and Reed. It remains to be seen how the SEC will address their concerns about crypto ETF approvals and the potential risks associated with them.
๐ฅ Hot Take: Democratic Senators Push for Stricter Regulation of Crypto ETFs ๐ฅ
Democratic Senators Laphonza Butler and Jack Reed have written a letter to SEC Chair Gary Gensler, urging him to strictly limit the approval of crypto-based exchange-traded funds (ETFs). They argue that cryptocurrencies pose significant risks to ordinary Americans and express concerns about brokers providing incomplete or deceptive information about bitcoin ETPs. The senators also call for closer monitoring of communications from brokers and advisors regarding ETFs, as well as ensuring appropriate naming conventions in official filings.
Their letter follows the recent approval of spot bitcoin ETFs by the SEC, which led to a surge in bitcoinโs price. However, experts suggest that the chances of a spot Ethereum ETF getting approved in May are low. It remains to be seen how Gensler will respond to these concerns raised by the senators and how it will impact the future regulation of crypto ETFs.
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