ETF Providers Request Changes to SEC Application Process
Three prominent ETF providers, namely VanEck, 21Shares, and Canary Capital, have reached out to the US Securities and Exchange Commission (SEC) with a formal request to revert to the previously established “first-to-file” standard for the evaluation of ETF applications. This approach, which was employed prior to the emergence of cryptocurrency ETFs, allows for applications to be processed in the order they are received.
Concerns Over Market Competition and Financial Innovation
The firms contend that by straying from this practice, the SEC obstructs market competition and stagnates financial innovation. In their letter, they emphasized that this shift reduces incentives for developing new financial products, which in turn limits options available to investors, compromises market efficiency, and jeopardizes the SEC’s foundational role in investor protection and market integrity.
They further articulated that the ongoing preeminence of the US in financial innovation is closely linked to regulatory frameworks designed to foster and promote entrepreneurial endeavors and genuine innovative efforts.
Growing Interest in Digital Asset ETFs
In recent years, there has been a significant uptick in the number of application filings for digital asset ETFs. This trend intensified following the inauguration of President Donald Trump, with asset managers and cryptocurrency firms eager to obtain approvals for new investment products amidst expectations of a more favorable regulatory environment.
Despite the rising interest in altcoin and staking ETFs from institutional investors, the SEC has been slow to reach verdicts on these applications, leading to notable delays. In May, for instance, the agency postponed its decision regarding Grayscale’s spot Solana View Trust ETF until October, among other altcoin and staking ETF approvals. This delay was anticipated by industry analysts, who observed that the SEC often utilizes the full timeframe to assess 19b-4 filings. Most of these pending applications have deadlines set for October, making early approvals a rarity in this context.
SEC Concerns About ETF Registration Statements
Furthermore, the SEC has expressed apprehensions about the effective registration statements for the REX-Osprey staked ETFs, indicating that these products might not qualify as ETFs due to the financial structure of the underlying fund. This raised concerns and resulted in a postponement of their launch, contrasting with many analysts’ initial predictions that these statements would lead to swift introductions of the ETFs into the market.
