Crypto ETFs face SEC hurdles as asset managers seek new products

Crypto ETFs face SEC hurdles as asset managers seek new products

After the long-awaited approval of U.S. bitcoin exchange-traded funds (ETFs), fund managers are eager to launch more cryptocurrency products, but they may face resistance from the U.S. securities watchdog.

The Securities and Exchange Commission (SEC) has been reluctant to approve spot bitcoin ETFs for years, citing concerns about market manipulation. However, the SEC had to greenlight them last month after losing a court case to Grayscale Investments, which challenged the agency’s rejection of its product.

The court ruling encouraged 12 fund managers, including Grayscale, ProShares, VanEck, Invesco, Fidelity and Ark Investments to file applications for 25 new cryptocurrency ETFs. Some of these products are complex and would use options to magnify bitcoin’s volatility. Others would track the price of ether, the second-largest cryptocurrency after bitcoin.

Investors are hopeful that the new products will help bring crypto closer to the mainstream. Bitcoin reached $50,000 on Feb. 12 for the first time in over two years and ether has gained more than 12% this year on hopes of SEC approval.

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However, the SEC is still wary of cryptocurrencies and sophisticated exchange-traded products, and lawyers and industry sources said the agency will proceed cautiously. The legal status of ether is also unclear, they noted.

“It doesn’t seem like there’s a rush to approve a second wave of products,” said Yesha Yadav, a professor focusing on digital asset regulation at Vanderbilt University, adding the SEC will have to “grapple with” how much risk it can tolerate.

SEC Chair Gary Gensler remains a crypto skeptic, and he warned investors that the bitcoin ETFs were very risky and that the approval did not imply the SEC was ready to endorse other crypto products.

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Source : yahoo finance

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