Approval of spot Ethereum ETF products is in jeopardy. US senators are making moves to discourage the SEC on crypto ETFs. Rhode Island Senator Jack Reed and California Senator Laphonza Butler penned a compelling letter to SEC Chairman Gary Gensler. In the letter, they call for rigorous review and caution in the approval process for crypto ETFs. This has led to uncertainty regarding the approval of Spot Ethereum ETF applications by Grayscale, BlackRockBlackRock, VanEck, and Franklin Templeton.
Will the SEC reject spot Ethereum ETF applications?
Senators took a cautious approach, citing concerns about market integrity and investor protection. Therefore, he opposes the general approval of cryptocurrency ETPs. They call for strict limits on the precedent-setting practice of such approvals. They also claim that markets for other cryptocurrencies lack the trading volumes and integrity to support relevant ETPs.
“Finally, we believe that the SEC should strictly limit the precedent application of these approvals,” the senators say. So the chances of the SEC approving Spot Ether ETFs in May have diminished significantly. In the letter, they also warn of the risks posed by under-traded cryptos and those susceptible to fraudulent schemes.
Senators called for restraint on the SEC in the face of increasing risks!
Additionally, Senators Reed and Butler express skepticism regarding the suitability of these assets for ETPs. As justification for this, they cite potential risks to individual investors. The senators underscore the SEC’s discretion in approving such products. In this context, they call for restraint in the face of increasing risks. In this context, they include the following statements in the letter:
Retail investors will face major risks from ETPs that reference lightly traded cryptocurrencies or cryptocurrencies whose prices are particularly susceptible to pump-and-dump or other fraud schemes.
Ethereum ETF approval probability in May is very slim!
cryptokoin.comAs you follow from, previously Bloomberg ETF expert Eric Balchunas significantly reduced the probability of Spot Ethereum ETF approval from 60-70% to 30% in May. This decline in optimism coincided with dissatisfaction with the SEC’s handling of Ethereum ETF applications.
Moreover, the SEC’s lack of involvement and silence on the issue has left the market uncertain about its final decision. Therefore, if the regulator decides to comply with the request made by US senators, it will likely reject applications for a Spot Ethereum ETF from giants like BlackRock, Grayscale, and others. In addition, the possibility of XRP, SHIB or TRX ETFs will also disappear.
Review on Bitcoin ETFs
Senators Reed and Butler also oppose the name Bitcoin ETF. They emphasize that they should be called Exchange Traded Products (ETPs) rather than ETFs. In this regard, they underline the need for clarity in terminology. They emphasized the importance of ensuring that investors receive complete and accurate information about crypto ETPs. These U.S. senators also called for close scrutiny of broker-dealers’ communications to reduce the risk of misinformation.
Additionally, the senators underlined the regulatory obligation to protect investors’ interests. They pressed the SEC to “examine brokers and advisors who recommend cryptocurrency ETPs to ensure they are acting in their clients’ best interests, as required by SEC rules.” They also emphasized the importance of vetting advisors recommending cryptocurrency ETPs to determine compliance with SEC regulations.
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