SEC Chair Receives Letter from Senators with Concerns Regarding Crypto ETFs

Two United States senators, Jack Reed and Laphonza Butler, have voiced their concerns to Gary Gensler, the head of the Securities and Exchange Commission (SEC), regarding the approval of further cryptocurrency exchange-traded funds (ETFs). 

In a letter, they emphasized the “enormous risks” that retail investors would face if the SEC were to greenlight additional crypto ETFs. The senators specifically highlighted the potential exposure of investors to “thinly traded” markets rampant with fraud and manipulation.

As reported earlier by TheCoinRise, the data shared by the nonprofit advocacy organization ‘Stand with Crypto’ pointed out that at least 18 senators in the US are pro-cryptocurrencies.

SEC Asked not to Approve ETH ETFs 

Currently, there are eight proposed spot ETH ETF applications awaiting approval by the SEC, with hopes lingering for other altcoins to follow suit. 

Reed and Butler cautioned against these approvals, warning of the susceptibility of thinly traded cryptocurrencies to schemes like pump-and-dump operations.

Vulnerabilities of the Crypto Space

The senators urged the SEC not to let the recent approval of spot Bitcoin (BTC) ETFs set a precedent for further approvals. 

They acknowledged the vulnerabilities of the Bitcoin market but emphasized that it was more established and scrutinized compared to smaller cryptocurrencies, which are more exposed to misconduct.

Furthermore, Reed and Butler called for “several specific steps” to be taken regarding the already launched Bitcoin ETF products, advocating for increased regulatory scrutiny on BTC ETF brokers and advisors.

Political Pressure Might Delay Approval of ETH ETF

Alexander Grieve from crypto venture capital firm Paradigm suggested that the success of spot Bitcoin ETFs had stirred political feathers on Capitol Hill. This political pressure, as evidenced by the senators’ letter, may diminish the likelihood of an ETH ETF approval in May.

Eric Balchunas, an industry pundit, echoed this sentiment, indicating that high-ranking Democrats’ discontent with the Bitcoin ETF’s success could dampen the prospects of ETH ETF approval. 

Balchunas had previously estimated the chances of a spot ETH ETF approval by May at just 35%, citing various factors, including the SEC’s lack of communication with prospective fund issuers.

Coinbase Exec Responds to the Letter Sent to the SEC

Reed and Butler’s involvement in legislative efforts to regulate cryptocurrencies further underscores their stance against the expansion of the crypto market without adequate safeguards. 

On the other hand, Coinbase’s legal chief, Paul Grewal, pointed out that digital assets other than Bitcoin “demonstrate market quality metrics that exceed even the largest traded equities.”