Key facts
- The SEC is seeking public comment on the regulation of ETFs investing in novel asset classes or employing new strategies.
- The agency will evaluate whether existing rules are appropriate for these emerging ETF structures.
- The public comment period will be open for 60 days.
- Recent trends show crypto ETF issuers developing more specialized products beyond basic price tracking.
- ETF issuers are also exploring combinations of digital assets with traditional asset classes.
The U.S. Securities and Exchange Commission (SEC) has initiated a public consultation to gather feedback on the regulation of exchange-traded funds (ETFs) that incorporate novel asset classes or employ new investment strategies. The agency is assessing whether current regulatory frameworks are adequate for these increasingly specialized products.
The consultation specifically targets funds that invest in innovative asset classes or utilize new strategies, with the SEC evaluating the appropriateness of existing regulations. Market participants will have 60 days from the publication of the request in the Federal Register to submit their comments, after which the SEC will consider potential regulatory adjustments.
This move comes as ETFs have experienced significant growth, with assets under management projected to rise from approximately $4 trillion in 2019 to over $12 trillion by the end of 2025. The request for comment follows a similar recent initiative by the SEC and Commodity Futures Trading Commission (CFTC) to harmonize portfolio margin rules.
In the crypto space, ETF issuers have been moving beyond simple price-tracking products. Examples include ProShares' GENIUS Money Market ETF, designed around reserve assets for payment stablecoins, and Grayscale's Hyperliquid Staking ETP. BlackRock and Goldman Sachs have proposed ETFs involving Bitcoin options and covered-call strategies, while Franklin Templeton has put forward proposals for ETFs that combine US equities with Bitcoin allocations through various instruments. Bitwise has also launched an ETF that pairs Bitcoin with gold and mining equities.