The differing positions of these giants are now public as the U.S. Securities and Exchange Commission (SEC) published responses to its request for comment on “Novel ETFs” (exchange-traded funds). As the name suggests, these include funds that hold unusual assets or offer less common strategies, including investments in crypto assets. In total, the SEC asked 27 questions, while the commission’s decision on two aspects of the ongoing debate will determine how quickly your next crypto ETF arrives and how good it is.
First, the positions differ on whether ETF filings should be left public until they can start trading. Second, companies took different stances on how fast the approval process should be.
AI-Powered Crypto ETF Copycats
The debate over public versus confidential filings cuts both ways. Previously, the SEC has shared market participants’ observations that “several Novel ETF filings submitted in rapid succession that are largely identical,” as AI is suspected to be helping competitors copy filings faster. Therefore, crypto giant Grayscale, which now offers 18 ETFs/ETPs (exchange-traded products), requests a confidential filing period because it would “reduce the incentive for competing sponsors to file imitative or duplicative registration statements.”
Crypto Council for Innovation (CCI) also supports an optional confidential or pre-filing process “to reduce imitative filings that may impede true innovation.”
Meanwhile, TradFi giant Charles Schwab, which keeps strengthening its position in the bitcoin and crypto market, is against a fully confidential filing process. The broker argues that public filings allow it to prepare for upcoming ETFs, including educating its investors, before a new investment vehicle launches.
However, the company, with $13 trillion in total client assets, suggested a compromise should confidentiality be introduced. In that case, if the SEC engages with an ETF sponsor confidentially, the filing should be public for at least 75 days before the fund becomes effective. This would give the broker more time to prepare.
In either case, most U.S. spot crypto asset products aren’t legally ETFs, but trusts registered under a different law with no automatic effectiveness. Now, CCI is asking the SEC to extend that 75-day mechanism to them, so sponsors have a guaranteed date they can plan a launch.
Speed vs. Quality
And this is where the second major difference emerges. While Grayscale wants more confidentiality, it also asks for a shorter wait and a 45-day deadline for the SEC to respond. CCI also argues that this confidential process should “not extend or toll the automatic effectiveness or review period,” while A16z (Andreessen Horowitz) also adds that the Commission should shorten its review process. According to the venture capital giant, filings are now being “submitted electronically, the disclosure is largely templated, and the analytical questions presented in a given product category tend to recur across sponsors.”
Also, per the company, “the markets these products are designed to access move on a shorter horizon than the current review period.” However, A16z emphasizes that this faster process doesn’t mean “a lighter review.”
Like Charles Schwab, Jane Street also opposes a quicker process, arguing that it might create low-quality, less competitive, and less liquid investment products. This could also hurt retail investors with wider spreads, or the gap between the buying and selling price at any moment.
“Review of the registration framework to reduce rushed registrations could encourage ETFs to solicit feedback and support from a wider range of market makers on fund structure and liquidity provision,” Jane Street remarked in the comments.
What Does a Crypto Investor Really Need?
Therefore, if the SEC gives Grayscale, A16z, CCI, and the companies behind the council what they’re asking for, you might get more ETFs, including those tracking more obscure altcoins, and quicker. However, confidentiality would mean that brokers and the overall market might be less informed and prepared for upcoming investment opportunities. Also, a quicker process, especially if the SEC is flooded with listings, might mean lower-quality and, through wider spreads, more expensive products for investors.
Conversely, a more public and slower process might bring fewer but better-quality products. The question is what matters more to crypto asset investors, who are used to gambling on obscure tokens and highly leveraged products in a fast-changing market.
Now, the market will wait for the SEC’s decision on this. However, it’s unknown when, or whether, anything will change after all these comments are reviewed, while new ones might keep coming. Also, more meetings with industry players trying to defend their positions might be arranged.
In the meantime, investors already have a wide crypto-asset ETF menu to choose from. Per ETF.com data, in the U.S., there are already 174 crypto asset-related ETFs. The largest of them is the Ishares Bitcoin Trust ETF (IBIT) by Blackrock, with around $61 billion in assets under management, or around 38% of all crypto asset ETFs.
