Industry participants said they saw few surprises so far.
“The most interesting and important thing about this guidance is that it exists,” said Matt Hougan, chief investment officer of Bitwise Asset Management, which has more than half a dozen crypto ETFs awaiting SEC approval.
“It suggests that the SEC acknowledges that crypto ETPs are becoming part of the mainstream and so it’s trying to lay down rules of the road to save both issuers and SEC staff time and hassle.”
The SEC guidance spells out that in order to be approved, issuers must clearly address, in “plain English”, all factors that make crypto-based ETFs distinctive, such as custody arrangements and risks of the hyper-competitive landscape.
The next document, however, is likely to prove more significant. According to several people familiar with the ongoing discussions, who could not speak publicly due to the confidentiality of those proceedings, the SEC staff is seeking to create a new listing template to replace the current need for exchanges to submit a special form each time they want to list a new crypto product.
That form, known as a 19(b)4, asks for an exemption from current listing rules for the specific ETF. Eliminating that from the process could cut the time between filing and launch dates from as much as 240 days to only 75 days.
“The SEC is looking for a general rule it can apply to all listings, and currently is going back and forth on precise wording with the exchanges,” said a senior executive at one issuer, who added he expected that exchanges will submit that kind of general filing within “days or weeks.”
Officials at the Nasdaq Stock Market and Cboe declined to comment on these talks; the New York Stock Exchange did not respond to requests for comment. A spokesperson for the SEC also declined comment on the discussions.
While ETFs tied to the spot prices of everything from coins like XRP, Polkadot, Dogecoin and the Trump meme coin await an SEC verdict, issuers expect the next batch of crypto products will be tied to Solana, the world’s sixth-largest cryptocurrency.
That likely will not happen until after the SEC has rolled out the second part of its guidance, pushing the launch date into early autumn, issuers said.
Some asset managers are not waiting.
Last week, REX Financial and Osprey Funds used a more indirect and complex approach to launch the first U.S. ETF to give investors exposure to Solana, the REX-Osprey Sol + Staking ETF. In contrast to the half-dozen spot Solana ETFs awaiting approval, it invests in a separate entity that in turn will own both Solana and a non-U.S. Solana fund.
That structure means REX can bypass the rules governing those commodity funds and leapfrog other issuers, as well as offering investors access to yield via the cryptocurrency “staking” mechanism.
In staking, cryptocurrency holders volunteer to take part in validating transactions on the blockchain, checking that the ledger all adds up. In return, validators either receive a share of the transaction fees or newly created cryptocurrencies.
“We do think the SEC is taking big steps forward in dealing with cryptocurrency, but it’s still the SEC, and not everything has been codified yet,” Greg King, CEO of REX Financial, told Reuters.
King acknowledged he is trying to get a head start on what is expected to be a fiercely competitive race for market share on new Solana products.
The new ETF pulled in $12 million of assets on its first day of trading on Wednesday, July 1, King said.
“We’ll probably do a spot Solana ETP too, once those rules are in place,” he added. “There’s no either/or in this situation.”
