tl;dr
The US Securities and Exchange Commission (SEC) is closer to approving more cryptocurrency exchange-traded funds (ETFs) by introducing new listing standards focused on derivatives markets. ETFs are eligible if their futures contracts have been listed for six months on Coinbase Derivatives or the Chi...
The US Securities and Exchange Commission (SEC) is moving closer to approving a broader range of cryptocurrency exchange-traded funds (ETFs) by introducing new listing standards focused on derivatives markets. This follows the SEC’s recent approval of in-kind ETF redemptions, which allows investors to directly swap tokens with issuers.
Under the new framework, ETFs for cryptocurrencies are eligible if their futures contracts have been listed for at least six months on either Coinbase Derivatives or the Chicago Mercantile Exchange (CME). Analyst Eric Balchunas highlighted that this change could enable ETFs for about a dozen altcoins, especially since Coinbase’s derivatives platform offers a wider range of coins compared to CME. This move aligns crypto ETFs more closely with traditional financial infrastructures.
Despite this progress, the route remains complex for meme coins or lesser-known digital assets that lack active futures markets. Such tokens may need to follow a more restrictive regulatory path under the Investment Company Act of 1940, known as the “40 Act,” as opposed to the more straightforward 1933 Securities Act that governs most spot crypto ETFs. Industry insiders suggest the simpler 33 Act structure is generally preferred by issuers for its less stringent requirements.
ETF analyst James Seyffart pointed out that the SEC's new standards place significant decision-making on futures markets, which are overseen by the Commodity Futures Trading Commission (CFTC). This means the presence of futures contracts is now the central criterion for ETF eligibility, with factors like market capitalization and liquidity notably absent from the criteria.
Coinbase Derivatives remains a crucial player given its status as the only “pure crypto” member of the Intermarket Surveillance Group, a key organization for market oversight. While the SEC’s filing establishes the framework, the exact timing of approvals depends on regulatory feedback, with potential green lights expected as early as September or October.
This regulatory shift marks a significant milestone in bringing cryptocurrencies deeper into mainstream financial markets. Though it may not unleash a flood of new ETFs immediately, it offers a clearer path for a wider array of crypto assets beyond Bitcoin and Ethereum to achieve ETF listing and exposure in the near future.