Crypto Industry Calls on SEC to Avoid Blanket Restrictions on Novel ETFs
Participants in the crypto industry have urged the U.S. Securities and Exchange Commission (SEC) to refrain from imposing blanket restrictions on “novel” exchange-traded funds (ETFs). Instead, they advocate for product evaluations based on specific risk factors. Venture capital firm a16z, digital asset manager Grayscale, and the Crypto Council for Innovation (CCI) called for clearer registration procedures and closer cooperation with the regulator, opposing changes to existing investment-company classifications that might inadvertently encompass non-security products.
SEC’s Regulatory Consultation Context
The SEC opened a 60-day public comment period on June 30 regarding the regulation of the next generation of ETFs. The consultation sought feedback on whether current regulations are sufficient, how new fund types should be regulated, and whether modifications to the registration process are necessary. The comment period closed on August 31, resulting in numerous industry submissions.
Crypto Industry’s Position
Venture capital firm a16z advocated for assessing products based on their asset characteristics and risk profiles, noting that crypto-based ETPs now operate within a more mature infrastructure, including exchange-approved listing standards and established disclosure requirements. They recommended coordinating fund registration and exchange-listing reviews while promoting more predictable regulatory timelines.
Grayscale and CCI Perspectives
Digital asset manager Grayscale emphasized that digital asset products with proven compliance and disclosure histories should not be subjected to new portfolio conditions or disclosure regimes solely because they are classified as novel. Meanwhile, the Crypto Council for Innovation (CCI) called for regulatory efficiencies comparable between ETFs and non-ETF ETPs, preserving existing investor protections. All three parties supported optional confidential pre-filing consultations with the SEC.
Diverging Views on ETF Classification
A key disagreement centered on the use of the ETF label. a16z proposed reserving the ETF designation for funds regulated under the Investment Company Act of 1940. Grayscale argued that the ETF label should describe economic features regardless of the legal wrapper. CCI urged the SEC to focus on clearer registration status disclosures rather than making radical changes to the current approval framework.
Why it matters
This news highlights the crypto industry’s push for more nuanced and risk-based regulation, which could speed up innovation while preserving investor protections. The submissions from major industry players reflect an effort to engage constructively with the SEC to develop a balanced approach that recognizes the unique aspects of digital assets alongside established market practices. If adopted, this approach might prevent unnecessary bureaucratic hurdles and foster a more robust legal infrastructure for crypto investments.
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