In a concerted effort to safeguard investors, two United States senators, Jack Reed and Laphonza Butler, have penned a letter urging Securities and Exchange Commission (SEC) Chair Gary Gensler to refrain from greenlighting additional cryptocurrency exchange-traded funds (ETFs). The senators emphasized the “enormous risks” posed to retail investors in the volatile crypto market.
In their missive dated March 11, Reed and Butler underscored concerns regarding the approval of ETFs linked to cryptocurrencies with thin trading volumes, highlighting the prevalence of fraudulent activities and market manipulation. Currently, eight spot Ether ETF proposals await SEC approval, with prospects for similar paths for alternative cryptocurrencies looming.
The senators cautioned against using the recent endorsement of spot Bitcoin (BTC) ETFs as a precedent for future approvals, emphasizing the relative stability and scrutiny of the Bitcoin market compared to smaller cryptocurrencies. They called for heightened regulatory oversight on BTC ETF brokers and advisors to mitigate potential risks.
Alexander Grieve, government relations lead at Paradigm, a crypto venture capital firm, suggested that the success of Bitcoin ETFs had unsettled policymakers, reflecting mounting political pressure on Gensler. This pressure dims prospects for an Ether ETF approval in May, according to industry analysts.
Citing Balchunas, a financial analyst, there’s a notable decline in the likelihood of a spot Ether ETF approval, dropping from 70% in January to a mere 35% in March. Balchunas attributed this shift to the SEC’s silence on prospective fund issuers, among other factors.
Both Senators Butler and Reed have been actively involved in legislative efforts aimed at regulating the cryptocurrency landscape. Butler co-sponsored Senator Elizabeth Warren’s Digital Asset Anti-Money Laundering Act, while Reed backed a bipartisan bill focusing on strengthening Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations for decentralized finance (DeFi).
The senators’ stance reflects a broader debate surrounding the regulation of crypto assets in the United States, highlighting the balancing act between innovation and investor protection in this rapidly evolving market landscape.
