Crypto Industry Urges SEC to Avoid Blanket Novel ETF Restrictions
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Article Content
Grayscale, a16z, and the Crypto Council for Innovation (CCI) have urged the US Securities and Exchange Commission (SEC) to preserve existing classification rules and avoid treating novel exchange-traded funds (ETFs) as a single category. They proposed different approaches to streamline and expedite reviews while evaluating products based on their unique risk parameters.
These industry participants opposed blanket restrictions, advocating for individual assessments of novel ETFs. a16z suggested that crypto-based ETPs, with more mature market infrastructure, should not be grouped with products holding private assets or employing other innovative strategies. Similarly, Grayscale argued that digital asset products with established compliance records should not face new conditions or disclosure regimes simply due to their "novel" nature.
In their letters dated August 31, the companies expressed opposition to changing existing investment-company classifications in ways that could automatically include non-security products under the Investment Company Act framework. The SEC had opened a consultation window on June 30, seeking feedback on novel ETFs and regulatory adjustments, which concluded after a 60-day public comment period.
While commenters generally disagreed with categorical changes, their recommendations varied in terms of classification, approval procedures, and terminology. a16z suggested reserving the ETF term for funds under the Investment Company Act of 1940, while Grayscale proposed defining ETFs by economic characteristics rather than legal wrapping. CCI advocated for clearer registration disclosures instead of radical changes to the current framework.
This development underscores the industry’s push for regulatory clarity and efficiency in navigating novel financial instruments.