- CCI encourages the SEC to make the approval process for Novel ETPs more efficient in terms of timing and regulation.
- The organization also calls for parity of tax treatment, disclosure requirements, and confidentiality for novel ETPs.
Crypto Council for Innovation is advocating for a modernized framework for ETP by the Securities and Exchange Commission. CCI is calling for more clarity and predictability in the process of obtaining approvals for innovative ETPs. The suggestions from CCI were presented on August 31 concerning the framework for novel ETFs proposed by the SEC. The framework involves products that relate to crypto assets, blockchain opportunities, and event contracts. CCI is advocating for the same level of efficiency in the process of gaining approval for non-ETF products as that provided for qualifying ETFs.
CCI Pushes for Faster ETP Approvals
Existing regulations on ETFs may provide a blueprint for expanding the scope of reform to ETPs, according to CCI. For instance, Rule 6c-11 allows qualifying ETFs to conduct their activities without the need to receive exemptive orders on a case-by-case basis from the SEC. Similarly, Rule 485 allows ETP sponsors to file new funds using post-effective amendments with specific automatic effectiveness dates.
CCI calls for such efficiencies in the context of ETPs that do not qualify as ETFs. Additionally, CCI favors clear criteria in respect of which issuers will have a better idea of how much time is needed for product approval. The proposed measures would be especially applicable in developing products in the form of exchange-traded instruments based on digital assets.
Industry Group Targets Tax Differences
The second issue for which CCI seeks action by the SEC is coordination with the Treasury and IRS in respect of the taxation of the product. According to CCI, there are certain types of ETPs which are not ETFs, but whose tax status could be less favorable than that of ETFs.
In light of the above mentioned facts, the group feels that there should be coordination between the tax rules and securities market approval procedures. CCI is against any changes to the existing definition of an investment company under the Investment Company Act. It believes that the current statute provides regulators sufficient flexibility in determining whether Novel ETFs should be considered an investment company under the law.
Clearer Labels for Investors
CCI further called for clearer naming and disclosure requirements for products that are not deemed investment companies. CCI expects these products to be easily differentiated from ETFs. It cited exchange-traded commodity trusts and some digital asset products as examples. They can use the term “ETF” although they have varying structures under securities law.
CCI also favors confidential draft registration statements and pre-filing consultations voluntarily. It stated that such an approach will guard innovative products from copycat filings before their introduction. However, it isseeking confidentiality measures without extending timelines for Rule 485 filing. CCI’s proposal therefore includes a faster approval process with clear disclosure and greater protection for innovative products.
