The SEC could approve hundreds of crypto ETFs

The SEC has approved some changes to the approval rules for ETFs proposed by Nasdaq, Cboe BZX, and NYSE Arca. 

These changes foresee the adoption of generic listing standards for commodity-based funds, allowing for the listing and trading of eligible products through a simplified process.

The situation so far

Until now, those who wanted to issue a new crypto ETF on US exchanges had to go through a complex individual approval process. 

In other words, it had to apply to the SEC, and the agency had to examine each individual request one by one, expressing approval or disapproval for each request, one by one. 

This on one hand has likely created an excessive workload on the agency, while on the other hand has set the stage for some distortions. 

For example, in the past, the SEC had approved Bitcoin futures ETFs, but rejected those on Bitcoin spot. 

This specific distortion eventually turned out to be even unlawful, to the point that a court explicitly ruled against the SEC, effectively ordering the agency to approve the spot Bitcoin ETFs, given that it had previously approved those on BTC price futures. 

That ruling paved the way for the stock market debut of spot crypto ETFs, first on Bitcoin in January 2024, and then on Ethereum in July of the same year. 

Crypto ETF: the SEC’s Change

In light of the recently approved amendment, the SEC will introduce a standard procedure for certain ETFs. 

In other words, instead of examining, analyzing, and judging each request individually, those that fall within the eligible products can follow an approval procedure that effectively provides for automatic approval if all standards are strictly adhered to. 

Thus, the agency will only need to review and analyze the requests to decide if they meet the standards, and if so, the approval would be automatic. 

The products eligible to follow this new process are those based on commodities, not for example those based on securities (such as stocks), or based on baskets, or actively managed. 

In other words, the requests for issuing passively managed ETFs that replicate the prices of a specific commodity can follow the simplified procedure, provided that they are indeed based on a commodity. 

The crypto ETFs on the market

Until 2023, the SEC among cryptocurrencies considered only Bitcoin as a commodity. All others were either considered securities or of dubious nature. 

In this case as well, it was a court ruling, which came in 2023, that refuted this approach by the SEC. 

This is the ruling in which a judge declared that XRP on secondary markets (i.e., exchanges) cannot be considered a security, according to the law. 

From that moment, the agency was forced to judge the majority of cryptocurrencies as commodities, primarily Ethereum. In fact, in May 2024, it approved the issuance requests on US exchanges for spot ETH ETFs.

The consequence of all this, according to the ETF expert from Bloomberg, Eric Balchunas, is that there are now good chances that over the next 12 months more than a hundred new crypto ETFs will be launched on US exchanges. 

It’s a bit like a dam that had held back this inevitable evolution for a few years has given way. 

Balchunas also notes that the last time the SEC implemented generic listing standards for ETFs, launches tripled.

The Impact on Cryptocurrency Prices

This news had a positive impact on cryptocurrency prices. However, the impact does not seem particularly significant for now. 

The altcoin season index by CMC, for example, has moved from 69 to 72 points, remaining below the 75 points that mark the beginning of an altseason. Moreover, in recent days it had already risen to 70, so today’s increase is not significant. 

As for the prices of the main cryptocurrencies, none of the top 10 today show a daily increase of more than 5%, and in the top 20 only Hyperliquid (+6%), SUI (+5%), Avalanche (+8%) and Bitcoin Cash (+5%). 

The point is that, just like the spot ETH ETFs in July 2024, the mere listing of ETFs on altcoins might not have a significant impact on their price. It only had an impact on Bitcoin, which, however, is another matter (and obviously not an altcoin). 

It is more likely that the real reason for today’s price rise is the upward trend of the altcoin season index that started about ten days ago, and that the news reported in this article only served as a trigger for a further rise.