Two Democratic U.S. senators have urged Securities and Exchange Commission Chairman Gary Gensler not to approve any more future cryptocurrency products following his approval of a spot Bitcoin exchange-traded fund earlier this year.
Senators Raponza Butler of California and Jack Reed of Rhode Island said the SEC should limit future applications of cryptocurrency ETFs and that other cryptocurrencies “do not demonstrate the trading volume or integrity to support relevant ETPs.” Both senators are also members of the Senate Banking Committee, which oversees securities and financial markets.
The letter was dated March 11th. Published on X.com March 14, 4:28 PM EDT (20:28 UTC).
“Retail investors will face tremendous risk with ETPs, which refers to cryptocurrencies with low trading volumes or whose prices are particularly vulnerable to pump-and-dump or other fraudulent activities,” they said. “The Commission has no obligation to approve such products and, given the risks, it should not.”
After the SEC approved 11 spot Bitcoin ETFs last January, attention has focused on whether the agency will be able to approve a spot Bitcoin ETF. Ethereum ETH
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Next is ETF. So far, well-known companies such as BlackRock and Fidelity have submitted applications. Optimism about whether the agency would approve such a product has waned over the past week. Bloomberg ETF analyst Eric Balchunas fell He estimated the likelihood of a spot Ethereum ETF being approved by May at around 70% to 30%.
Bitcoin ETF Concerns Found
Senators Butler and Reed also raised concerns about communications between brokers and retail investors that occurred in January. report From the Financial Industry Regulatory Authority. The watchdog, which oversees brokerage firms, found that 70% of communications about cryptocurrencies may have breached rules meant to be fair and balanced, and said some companies had misrepresented that cryptocurrencies functioned like cash or cash equivalents. .
“These alarming flaws raise serious concerns that brokers and advisors may now be providing retail investors with incomplete or deceptive information about Bitcoin ETPs,” the senators said.
Reps. Butler and Reed also said that the name of the spot Bitcoin ETF raises issues. The product was primarily called a spot Bitcoin ETF, but the SEC called it an exchange-traded product (ETP).
“It may seem like a small difference, but this intentional confusion of terms is problematic because Bitcoin ETPs differ in important ways from mutual funds and ETFs,” they said.
The senators said Bitcoin ETPs, for example, do not receive the same protections as ETFs, including custody requirements and SEC scrutiny.
The SEC will closely scrutinize communications from brokers and advisors regarding Bitcoin ETPs, investigate brokers and advisors recommending ETPs to ensure they are acting in the best interests of their clients, and ensure that Bitcoin ETPs are You should avoid using confusing language in your filings and investor documents. The senators spoke.
An SEC spokeswoman said Chairman Gensler would respond directly to lawmakers.
Bloomberg ETF analyst Balchunas said the letter makes him more pessimistic about the spot Ethereum ETF.
“Bitcoin ETF’s blockbuster success is shaking high-ranking Democrats. Buyer’s remorse,” Balchunas posted on X on Thursday. “This is one of the reasons why we are pessimistic about the likelihood of Eth ETF approval.”
Paul Grewal, Coinbase’s chief legal officer, rebutted the senator’s letter, saying many cryptocurrencies “are showing market quality metrics that outperform even the largest traded stocks.”
For example, ETH has a deep and more liquid spot market compared to S&P 500 stocks, Grewal said. post Thursday at
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