Democratic senators Reed and Butler stirred up trouble within the crypto community by urging the SEC to cease approval of crypto-based ETFs.
Letter Demands No More Crypto ETFs
Two Democratic senators have provoked the ire of the crypto community by trying to convince the SEC not to approve any more crypto-based ETFs. On March 11, Senators Jack Reed and Laphonza Butler addressed the SEC chairman Gary Gensler in a letter claiming that any further crypto ETF approvals by the regulatory agency could expose retail investors to “enormous risks.”
The letter reads,
“Retail investors would face enormous risks from ETPs referencing thinly traded cryptocurrencies or cryptocurrencies whose prices are especially susceptible to pump-and-dump or other fraudulent schemes.”
Dem. Senators Against Crypto
Butler and Reed have both participated in multiple legislative efforts to regulate cryptocurrency within the United States.
On December 11, 2023, Butler partnered with Senator Elizabeth Warren as a co-sponsor for her contentious Digital Asset Anti-Money Laundering Act bill. Soon after, in July, Reed also sponsored a bipartisan bill focused on enhancing Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, along with sanctions requirements, specifically targeting decentralized finance.
Political Pressure Increasing On Crypto
The letter also cautioned the SEC against allowing the recent endorsement of spot Bitcoin ETFs to set a precedent for future approvals. The senators further pressed the SEC to implement specific measures regarding the already introduced Bitcoin ETF products, advocating for increased regulatory oversight of ETF brokers and advisors.
Senators Reed and Butler's efforts to block crypto ETF approvals highlight growing concern about potential hazards for retail investors and underscore the necessity for enhanced regulatory supervision in the crypto industry. Furthermore, it has also led industry experts to point out that the escalating political pressures might postpone the approval of an Ether ETF, with the likelihood decreasing from 70% in January to 35% in March.
Clapback From Coinbase
The letter has not, however, dimmed the enthusiasm of industry experts like Coinbase’s chief legal officer Paul Grewal, who has criticized the move to regulate Bitcoin ETFs and reject further crypto ETF applications. He called out the senators in a post on social platform X, where he elaborated on how the market for Ether and some other cryptocurrencies showcases quality metrics that surpass even those of the largest traded equities.
He claimed that the spot market for ETH demonstrated substantial depth and liquidity, surpassed only by two S&P 500 stocks in terms of notional dollar trading volumes. Furthermore, Grewal pointed out direct evidence indicating that Ether's futures and spot markets exhibit correlations comparable to those of Bitcoin.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
