Key facts
- Grayscale, a16z, and the Crypto Council for Innovation (CCI) urged the SEC to avoid blanket restrictions on novel ETFs.
- They proposed evaluating products based on individual risk parameters and underlying characteristics.
Grayscale, a16z, and the Crypto Council for Innovation have asked the SEC to maintain existing classification rules for novel exchange-traded products, advocating for individualized risk assessments rather than broad restrictions.
The crypto industry is seeking regulatory clarity and predictable approval processes for new financial products, aiming to prevent broad restrictions that could stifle innovation and delay market access.
Crypto industry participants, including Grayscale, a16z, and the Crypto Council for Innovation (CCI), 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 evaluating such products based on their individual risk parameters and underlying characteristics.
In letters dated August 31, these firms proposed different routes for clearer and faster reviews, emphasizing the preservation of existing classification rules. a16z suggested that the SEC coordinate fund-registration and exchange-listing reviews and adopt predictable timelines. Grayscale and CCI supported optional confidential pre-filing processes.
A key point of contention was the potential reclassification of products holding non-securities under the Investment Company Act of 1940. All three commenters opposed changes that could automatically sweep these products into the Act's framework. They argued that crypto-based exchange-traded products (ETPs) benefit from developed market infrastructure, including exchange-approved listing standards and established disclosure requirements, and thus should not be grouped with products holding private assets or using other novel strategies.
Grayscale specifically stated that digital asset products with established compliance and disclosure records should not face new portfolio conditions or disclosure regimes simply because they are labeled as novel. CCI called for comparable regulatory efficiencies across ETFs and non-ETF ETPs while maintaining investor protections.
While broadly opposing categorical regulatory changes that could delay product launches, the commenters differed on specific terminology and procedures. a16z proposed reserving the term 'ETF' for funds under the Investment Company Act of 1940, whereas Grayscale argued the term should describe economic characteristics irrespective of the legal wrapper. CCI urged the SEC to create clearer registration-status disclosures rather than radically altering the current approval framework.