Two US senators, Jack Reed and Laphonza Butler, have directed their concerns toward Gary Gensler, urging the chair of the Securities and Exchange Commission (SEC) to refrain from approving any further crypto exchange-traded funds (ETFs). Reed and Butler emphasized the “enormous risks” that such ETFs could pose to retail investors, particularly due to the inherent vulnerabilities of the crypto market.
Highlighting the potential dangers, the senators emphasized the prevalence of “thinly traded” markets within the crypto sphere, which they argued are susceptible to fraud and manipulation. They expressed particular concern regarding ETFs referencing cryptocurrencies prone to “pump-and-dump” schemes, warning of the significant risks involved for retail investors.
With eight proposed spot Ether ETF applications awaiting SEC approval, there have been growing expectations for the expansion of ETFs to encompass other altcoins. However, Reed and Butler’s letter raises doubts about the suitability of extending ETF approvals beyond Bitcoin. They stressed the need for caution, asserting that while Bitcoin’s market may have exhibited weaknesses, it remains more established and scrutinized compared to other cryptocurrencies.
In addition to advocating for restraint in approving further crypto ETFs, the senators urged the SEC to take proactive measures concerning existing Bitcoin ETF products. They proposed enhanced regulatory oversight for brokers and advisors involved in BTC ETF transactions, emphasizing the necessity of safeguarding investors’ interests amidst the evolving landscape of digital assets.