US Senators Push SEC To Stop Approval Of Spot Crypto ETFs

US Senators Push SEC To Stop Approval Of Spot Crypto ETFs

Two US senators have called on Gary Gensler, the Chairman of the Securities and Exchange Commission (SEC) to refrain from approving any additional crypto exchange-traded fund (ETF) applications.

According to the lawmakers, as vulnerable as Bitcoin may be to manipulation and fraud, the market for other crypto tokens is far more vulnerable to misconduct.

The lawmakers

Earlier this week, a letter was penned by US senators Laphonza Butler and Jack Reed to the chair of the US SEC regarding the potential approval of the Commission of crypto exchange-traded funds (ETFs).

The senators said that they were writing to urge the securities regulator to take steps to protect investors after it had recently approved the listing and trading of many spot bitcoin ETFs.

The senators noted that the regulatory body had approved a total of 11 spot bitcoin ETFs back in January.

They stated that the Commission should strictly limit the approval of these applications and it is not obligated to approve them in light of the risks involved and it should not do so.

They added that significant weaknesses had been seen in the bitcoin market, but it was considerably more established and scrutinized as compared to the market of any other crypto token.

The problem

They went on to say that the other cryptocurrencies do not seem to have the integrity or the trading volumes required for supporting exchange-traded products (ETPs).

The lawmakers said that manipulation and fraud is possible with bitcoin, but the risk is even more pronounced where other cryptocurrencies are involved.

In addition, the senators asked the SEC to take some specific steps to address the risks associated with the spot Bitcoin ETFs that have already been approved.

They specifically asked the Commission to scrutinize the communications of advisors and brokers regarding Bitcoin ETPs and examine the ones that recommend these ETPs.

They also requested that the SEC ensure that confusing and inappropriate naming conversions are not used by these spot Bitcoin ETPs.

The claims

According to the lawmakers, taking these steps would protect investors from abuse and fraud, which could happen in the current regulatory regime applicable to the recently approved spot bitcoin ETFs.

The letter further claimed that there would be enormous risks to retail investors from ETPs of cryptocurrencies with low trading volumes, or cryptocurrencies whose prices are highly volatile.

Currently, there are about 10 spot ether (ETH) ETF applications that have been submitted to the SEC. The first deadline for the Commission to decide this matter is in May.

Some, like Standard Chartered Bank, are optimistic, but others are skeptical because the SEC boss has consistently refrained from explicitly stating whether ether is a commodity or security.

He has repeatedly asserted that most crypto tokens in the market are securities. US spot bitcoin ETFs have become one of the most highly demanded ETPs.

They have recorded massive inflows since their approval and have managed to reach record trading volumes.