Cboe BZX
and NYSE Arca are tired of
waiting around. The two exchanges have filed proposals asking the SEC to make
the listing of crypto ETFs a much easier and quicker exercise. Upon a
successful rule change, they would not have to submit a separate request for
the listing of every single individual product. Rather, a standard framework
would cater for the listing of all crypto ETFs that meet pre-defined
conditions. The SEC's process for approving crypto ETFs has historically been
quite lengthy, many times taking many months yet with little clarification
allowed through.
How the Rule Would Work Right now, the regulatory
slow-motion of every single new crypto ETF applies to all new crypto ETF
applications. The exchange files a 19b-4 form, the SEC takes months to review it, and
sometimes there is no clarity until almost the very end of the 240-day
timeline. The new proposal gets rid of such cycle for funds within a defined
box like asset class, liquidity size, and whether some market surveillance
exists. It is a way to provide crypto ETFs with the same, faster method to
market, essentially, which other commodity funds such as gold are currently
following.
The More Funds, the Less WaitingUnder this scenario, a
massive wave of ETFs based on alt-coins like Solana, Avalanche, or even curated
baskets of cryptocurrencies could be enabled. As long as the issuers abide by
the rulebook, they should be able to launch without having to run through the
SEC gauntlet every time. Less waiting translates to more diversity and faster
time frame from conception to the trading floor.
Keeping In Pace With The Rest Of The SystemThis request is
not just coming out of nowhere. The SEC has recently allowed in-kind
redemptions for Bitcoin and Ethereum ETFs, meaning traders can now settle in
crypto instead of cash. That was a move that positioned these funds to be more
like traditional financial products. Next, the exchanges want the same logic to
apply to their listings. If the backend is evolving, they argue, so should the
front door.
Concerns For A Two-Tiered SystemNot everyone feels warm and
fuzzy about it. Critics are saying this could favour Bitcoin and Ethereum and leave the
rest of the projects high and dry. There is a concern that standardized
listings would stifle innovation or create barriers for lesser-known tokens
that may not meet those liquidity and infrastructure requirements. Some legal
experts believe that the process should remain fluid enough to engage a more
diverse group of assets, not just the usual suspects.
What's Next?
The SEC could sit back for some time and, thus, it is not in
a hurry. It has 240 days to respond, and possibly it could reject the proposal
or come back with amendments. It has been known in the past that this agency
takes some time, particularly in crypto activities. However, this time, it is
rumoured that less time could be used, possibly 75 days if the submissions can
be made in common formats.
What's Driving The Push?
The exchanges are in competition to draw ETF issuers. Nobody
wants to be the platform where it took too long or where the whole process was
painful. A faster run would help them claw back business from asset managers
who want to launch crypto funds, without months of uncertainty. It is also a
way to keep up with international markets that are already proceeding at a
faster pace.
The Bigger Picture
It's not about paperwork only. It is another step in the
process of normalizing crypto inside the wider financial system. The SEC is
showing some comfort in treating digital assets more like traditional
investments. This has already begun to show in the variety of crypto ETFs
currently live, some of which track newer coins and even some meme-influenced
products.
Why It Matters"
The approved smoothened listing would get fund issuers
moving quickly to the market, and investors would enjoy more choices, while the
entire ETF ecosystem would gradually begin taking a reference model for all
things finance. It is a measure of how ready the United States is to formulate
crypto into center stage.
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