KEY POINTS
Senators Jack Reed and Laphonza Butler have urged Gary Gensler to stop the approval of new cryptocurrency exchange-traded funds (ETFs), citing substantial risks for investors.
In a letter dated March 11, the senators voiced their worry that additional endorsements from the Securities and Exchange Commission (SEC) could potentially expose investors to unstable markets rife with deception and manipulation.
Investor Protection At Risk
Presently, the SEC is assessing eight pending applications for spot Ether ETFs, leading to speculation that more cryptocurrencies could also seek similar approval. The letter from the senators underscored the significant risks that retail investors might face with exchange-traded products associated with thinly traded or easily manipulable cryptocurrencies.
Additionally, the duo urged the SEC to refrain from establishing a precedent by approving spot Bitcoin ETFs, which could influence future endorsements. Alexander Grieve from Paradigm, a cryptocurrency venture capital firm, observed that the traction gained by Bitcoin ETFs seems to be attracting attention from legislators.
Opinion From Industry Experts
Industry experts suggest the letter will potentially increase political influence on Gensler, raising uncertainty about the imminent approval of an Ether ETF.
On March 11, analyst Balchunas evaluated the likelihood of an Ether ETF being approved by May at only 35%, a significant drop from the 70% probability he predicted in January. He pointed to the SEC’s limited engagement with fund applicants and other factors as worrisome indicators.
Both Reed and Butler have actively participated in legislative efforts aimed at regulating the cryptocurrency market in the U.S. Notably, on December 11 of the previous year, Butler supported Senator Elizabeth Warren’s Digital Asset Anti-Money Laundering Act bill as a co-sponsor.
