US Senators Advocate for SEC to Refuse Additional Crypto ETF Bids

Crypto News– Approval prospects for the forthcoming spot Ethereum exchange-traded fund (ETF) applications this May appear uncertain, following a plea from two US Senators to the Securities and Exchange Commission (SEC) to decline additional crypto ETF proposals.

US Senators Advocate for SEC to Refuse Additional Crypto ETF Bids

In a letter dated March 11 addressed to SEC Chair Gary Gensler, Senators Jack Reed and Laphonza Butler advised the financial regulator to enhance its scrutiny of Bitcoin ETFs.

Legislators Call on SEC to Cease Approval of Additional Crypto ETFs

The legislators have voiced apprehensions regarding the approval of additional crypto ETFs beyond Bitcoin, citing potential risks for retail investors.

They argue that cryptocurrencies like Ethereum lack adequate trading volumes and integrity to support related exchange-traded products (ETPs). Moreover, they express doubt that futures markets for these cryptocurrencies will closely correlate with spot markets, complicating effective market surveillance and fraud prevention.

Furthermore, they state:

“The SEC should strictly limit the precedential application of these approvals. While the bitcoin market has displayed serious weaknesses, it is nonetheless far more established and scrutinized than the market for any other cryptocurrency. However vulnerable Bitcoin may be to fraud and manipulation, markets for other cryptocurrencies are far more exposed to misconduct.”

Consequently, they emphasize the necessity for the financial regulator to shield retail investors “from ETPs referencing thinly traded cryptocurrencies or cryptocurrencies whose prices are especially susceptible to pump-and-dump or other fraudulent schemes.”

The lawmakers’ correspondence coincided with Bloomberg analysts significantly reducing the likelihood of a spot Ethereum ETF approval to 35%.

Eric Balchunas, Bloomberg‘s Senior ETF Analyst, speculates that the success of Bitcoin ETFs may have unsettled some politicians, contributing to the pessimism surrounding the approval of spot ETH ETFs.